Contributions, Tax

No TSB impact on business CGT contributions

business cgt contributions

The ability for an individual to make a small business capital gains tax contribution is not impacted by their total super balance.

An SMSF specialist has confirmed an individual’s total super balance (TSB) has no effect on their ability to make small business capital gains tax (CGT) contributions to their fund.

“The TSB test will not apply to small business CGT contributions whether it’s the retirement concession or the 15-year [rule]. So that means those members who have TSBs over and above the $1.7 million threshold … can still actually utilise the CGT concessions as long as they meet all of the other requirements,” SMSF Association policy manager Tracey Scotchbrook said during her presentation at the ASF Audits Technical Seminar 2021 held last Friday.

However, Scotchbrook warned practitioners their SMSF clients will have to ensure the election to use the small business CGT contribution provisions is made properly otherwise the money put into the fund will automatically be treated as a non-concessional contribution and this will bring the TSB threshold into play.

Further, she pointed out the importance of considering the timing of when a small business CGT contribution will be made if a person is planning on taking this course of action.

“So if you’ve got someone [whose balance] is below the [$1.7 million] TSB threshold, they’re going to qualify to make small business CGT contributions and they’re perhaps looking to make non-concessional contributions, [they need to] think about the timing of when that’s going to happen [and] whether [the strategy] is going to transverse the financial year, because when you’ve got large lumpy amounts of course you’re then going to have that uplift in that member’s account balance,” she warned.

“So you just need to have some forward thinking and strategising around the timing of contributions.”

In responding to a separate delegate’s question, she provided affirmation that currently the work test had to be satisfied by people over the age of 66 before they can make a small business CGT contribution.

She noted the regulator has assisted superannuants in being mindful this compliance obligation is necessary.

“If you actually look at the small business CGT contribution election form, the ATO [requires you to] tick a box as a reminder or prompt [asking] have you met the work test,” she said.

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