More Information About the Retirement Exemption

Tony Negline

This week I want to mention two issues in relation to the Small business CGT concessions.

You might recall that last week I mentioned the withdrawal of several ATO Interpretative Decision about this topic because of legislative amendments which had taken place over the last few years.

(Late last week the ATO withdrew another Interpretative Decision about this topic.)

In the minutes for the June 2009 meeting of the National Tax Liaison Group Superannuation Technical Sub-group there is a discussion about two aspects of these concessions.

The first issue talks about the timing of the super contribution when a person under 55 makes use of the Retirement Exemption. The law about this issue is not very clear.

One part of the law says that the choice to use the Retirement Exemption must be made before the taxpayer submits their tax return. The law that says the CGT proceeds must be contributed to super (if underage 55) by the later of making the choice to use the Retirement Exemption or the receipt of the procceds.

The ATO were asked if making the contribution before the choice is made to use the retirement exemption okay? As you might have picked up, the decision to use the retirement exemption must be made before the taxpayer submits their return. This choice can be made at any stage before that return is submitted. Indeed as the ATO point out the act of making the contribution is an indication that the person wants the capital gain exempt under the Retirement Exemption.

Now this situation is okay for individuals but what happens about retirement exemption super contributions made by trusts or companies? Yes, a similar rule applies to Retirement Exemption contributions made by trusts or companies. (Just remember that once a trust or company has made the choice, they only have 7 days to physically exercise this choice and make the super contribution.)

The next issue involves the making of Retirement Exemption super contributions when there are two shareholders - one is under 55 and the other is over age 55.

In this case the business can make a super contribution for the shareholder under age 55 but for those over 55 the payment must be paid the shareholder. For these older shareholders the business cannot make a super contribution and then offset this against what would have been paid directly to the shareholder.

Clearly you need to be very careful about these rules.

Details about the Small Business CGT Concessions are found in my book - A How To Book of Self Managed Super Funds.

Finally please consider purchasing a copy of my book. You can look at the contents page at the following link: http://www.atcbiz.com.au/smsfbooktoc.pdf

Two options are available - once only subscription - $55 inc GST - or an annual subscription will gives you access to all the updates made throughout the year ($120 inc GST).

The book can be purchased at the following link: http://www.atcbiz.com.au/smsfstore.php

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