An SMSF technical specialist has reminded practitioners of the need to satisfy the contribution acceptance rules for fund trustees before the small business capital gains tax (CGT) concessions can be used.
“I’ve always said sometimes this question [of whether we can use the small business CGT concessions] is incorrectly framed from the point of view ‘can I make a contribution’, where it should be framed from a trustee perspective – ‘can the trustee accept the contribution’,” Accurium head of SMSF education Mark Ellem told attendees of a technical webinar held today.
Ellem pointed out the applicable acceptance rules are basically those governing personal contributions under Superannuation Industry (Supervision) Regulation 7.04, whereby trustees can only accept monies allocated for an SMSF if the member is under the age of 74 or the transaction is made within 28 days of the end of the month when the member turned 75.
However, he recognised there is a specific clause also relating to the small business CGT concessions.
“[The above rules apply, but the trustees can also accept a contribution], and this is the part that relates back to the CGT small business concessions, if the amount does not exceed the CGT cap amount or if it is received under a look-through earnout right that related to a CGT event,” he noted.
He said not being able to satisfy the contribution acceptance rules when a member is looking to take advantage of the CGT small business concessions is a common error he sees.
“I’ve come across this on many occasions [where an adviser says:] ‘My 78-year-old client has sold their business, they’ve got access to the [ small business CGT concessions] 15-year rule and we’re going to put the money into super,’ and I have to say: ‘No, the fund can’t accept it,’” he said.
“[Then they ask] why not because they’ve got the CGT lifetime cap. [And I have to tell them] yes, but the acceptance rule simply says are they [age] 74 or under. Is [the contribution being made] within 28 days of the end of the month they turned 75? No.
“Does it relate to an earnout right that related to a CGT event when the trustee could have accepted the contribution? No.
“[So in these instances, the super fund] can’t accept [the contribution].”
