Private ruling: Capital gains tax
Published: June 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Does a capital gains tax (CGT) event occur on the rollover of shares from a private superannuation fund to another private superannuation fund where there is no change to either the beneficiary of the fund or the fund name? | A1: Yes.

Relevant facts and circumstances: The individual commenced employment with a company, and as part of the employment contract they were required to contribute to the Staff Superannuation Scheme. The individual was made redundant and was required to rollover his superannuation. The individual established a private superannuation fund. The sole beneficiary of the fund is the individual. The individual had full control of all investment decisions in the fund. The fund consisted of cash and Australian stocks. Due to the high administrative costs associated with this fund, there was little growth The stocks held in the fund were transferred into a new superannuation fund. There were no changes between the beneficiaries or terms of the superannuation funds.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20, | Income Tax Assessment Act 1997 section 104-60, and | Income Tax Assessment Act 1997 section 126-225.

Reasons for decision: Summary: Under section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997), a capital gain or capital loss is made when a CGT event happens to a CGT asset you own. CGT event E2 in section 104-60 of the ITAA 1997 happens if you transfer a CGT asset to a trust. A superannuation fund is considered to be a trust. Assets are held in the superannuation fund for the future benefit of the named recipients of the fund. However, unlike a normal trust fund, members in a superannuation fund do not have the same rights of entitlement as most beneficiaries in a trust. This is because members of a superannuation fund do not have the same absolute entitlement to the assets. In superannuation funds, members have the right to receive benefits from the fund, rather than being absolutely entitled to the assets themselves. Once they place the assets into the superannuation fund, they give up their claim to that asset until the fund ceases to function. Prior to 1 November 2008, CGT event did not happen if you transferred the asset from another trust and the beneficiaries and terms of both trusts were the same. However, after 1 November 2008, CGT event E2 occurs regardless of whether the beneficiaries and terms of the trusts are the same. In this case, a change of ownership occurred when the assets were transferred between the superannuation funds after 1 November 2008. Even though the beneficiaries and terms of both trusts are the same, the change of ownership occurred after 1 November 2008. Therefore, CGT event E2 occurred on the date of the transfer.

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