Simpler super - exclusion from the transitional non-concessional contributions cap

This information applies only to non-concessional contributions made between 10 May 2006 and 30 June 2007.

Exclusions

Under transitional arrangements, you can contribute up to $1 million of non-concessional contributions to your super fund between 10 May 2006 and 30 June 2007. This limit is referred to as the transitional non-concessional contributions cap.

You can exclude the following contributions from the $1 million transitional non-concessional contributions cap:

  • contributions arising from personal injury payments, or
  • up to $1 million of contributions derived from the disposal of certain small business assets.

Exclusion for personal injury contributions

If you make a super contribution during the transitional period which is derived from certain personal injury payments, you may be able to exclude it from your transitional non-concessional contributions cap.

To be excluded from the cap the contribution must have been derived from:

  • a structured settlement payment
  • an order for a personal injury payment, or
  • a workers compensation payment, taken as a lump sum.

The exclusion only applies to that part of the payment that is compensation or damages for personal injury. Also, two legally qualified medical practitioners must certify that as a result of the injury, you are unlikely to ever be gainfully employed in the capacity for which you are reasonably qualified.

You must give the approved form certifying the contribution was derived from a personal injury payment, to your super fund by 31 July 2007. This approved form will be available from the Tax Office shortly – from www.ato.gov.au/super or by phoning 13 10 20. You can submit the form after you have made your contribution.

Exclusion of proceeds from the disposal of small business assets

If you make a super contribution during the transitional period which is derived from the disposal of certain small business assets, you may be able to exclude all or part of it from your transitional non-concessional contributions cap.

However, these contributions will be subject to the capital gains tax (CGT) cap. Under the CGT cap, you can only make up to $1 million in non-concessional super contributions during your lifetime.

The CGT cap applies to all excluded CGT contributions, regardless of whether they are made between 10 May 2006 to 30 June 2007 or after 1 July 2007.

Contributions counted towards the CGT cap include:

  • up to $500,000 of capital gains that are disregarded under the small business retirement exemption
  • the capital proceeds from the disposal of assets that qualify for the small business 15 year exemption
  • the capital proceeds from the disposal of assets that would qualify for the small business 15 year exemption, except where:
    • asset was a pre-CGT asset
    • was no capital gain or capital loss, or
    • 15 year holding period was not met because of the permanent incapacity of the person (or a controlling individual of a company or trust).

The small business retirement exemption and the small business 15 year exemption are CGT concessions available to small business.

For more information about the small business CGT concessions, refer to the Advanced guide to capital gains tax concessions for small business (NAT 3359).

For contributions made during the transitional period to be counted towards the CGT cap, you must notify your super fund using the approved form before 31 July 2007. This approved form will be available from the Tax Office shortly – from www.ato.gov.au/super or by phoning 13 10 20. You can submit the form to your super fund after you have made your contribution.

Assets held in companies and trusts

The exclusion from the transitional non-concessional contributions cap can also apply where the small business asset is held in a company or trust. Where this occurs, the company or trust may have to make a payment to, or on behalf of, a person who is a CGT concession stakeholder of the company or trust.

If you’re a CGT concession stakeholder and you choose to have a contribution (whether made by you or by the company or trust) counted towards the CGT cap, you must notify your super fund using the approved form before 31 July 2007. This approved form will be available from the Tax Office shortly – from www.ato.gov.au/super or by phoning 13 10 20. You can submit the form to your super fund after you have made your contribution.

Example

On 15 March 2007, Sharon (who is 58 years old) sells an asset used in her small business. The capital proceeds of the sale of the asset are $1.6 million, and her capital gain from the sale is $580,000.

Sharon qualifies for the small business 15 year exemption, and can choose to disregard the capital gain for income tax purposes. Sharon also chooses to contribute the entire proceeds of $1.6 million to her super fund. She has not made any other non-concessional contributions and makes the contribution on 1 April 2007.

Sharon decides to count $1 million of the $1.6 million contribution as a personal contribution towards the transitional $1 milllion non-concessional contributions cap.

She chooses to have $600,000 counted towards the CGT cap. She then provides the approved form to her fund on the same day.

As Sharon has used her full $1 million transitional non-concessional contributions cap, she cannot make any further personal contributions until after 30 June 2007 without incurring a liability for making excess non-concessional contributions.

Sharon has also used $600,000 of her lifetime CGT cap, and has $400,000 of this cap left to use in the future.

More information

To obtain a copy of our publications or for more information:

    Australian Taxation Office
    PO Box 3100
    PENRITH NSW 2740

If you do not speak English well and want to talk to a tax officer, phone the Translating and Interpreting Service on 13 14 50 for help with your call.

If you have a hearing or speech impairment and have access to appropriate TTY or modem equipment, phone 13 36 77. If you do not have access to TTY or modem equipment, phone the Speech to Speech Relay Service on 1300 555 727.

Close Window