An SMSF technical specialist has reminded practitioners of the specific rules applying to individuals under age 55 wanting to make contributions under the small business capital gains tax (CGT) concessions using the retirement exemption.
“If you are using the retirement exemption, the most [you can contribute] under the CGT cap will be $500,000 because that’s the limit. [Also] if you are under 55 at the time, you need to contribute that amount to super,” Accurium head of SMSF education Mark Ellem told attendees of a technical webinar he co-hosted last week.
“[There are also rules around] the timing of making contributions with respect to the retirement exemption and the individual is under 55 and you’ve got to make the contribution in order for the retirement exemption to be fully applied.”
To this end, Ellem pointed out the aforementioned contribution, for an individual, must be made upon the latter of when the person has made the decision to use the retirement exemption or when the proceeds from the sale of the asset in question have been received.
If the situation involves a company or trust, then the contribution must be made by the later of seven days after a choice is made to disregard the capital gain or the proceeds from the CGT event have been received.
Further, if the proceeds from the sale of the relevant asset are received in instalments, an individual is required to make the contributions up to the limit of the cap when they receive each payment.
In the same set of circumstances, a company or trust must make a contribution when the instalments are received for at least one of its CGT stakeholders and must make the largest possible payment to the super fund when the initial instalments are received as opposed to spreading contributions evenly across the entire series of these receipts.
Ellem also took the opportunity to confirm the CGT election form must be submitted to the SMSF trustees before a contribution under the small business CGT exemption rules can be made.
