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I am auditing a 2022 fund. On 9.12.2021, the fund received $500,000 deposit with 2 separate notices and declarations, all dated as 06.12.2021, as follows:
Member A: I declare that the sum of $157,000 is a CGT exempt contribution. In 2006, I made a CGT exempt contribution of $343,000. I intend to claim a tax deduction of $25,000 as personal contribution.
Trustee writes: The trustee acknowledges that you intent to claim a tax deduction of $25,000 as contribution for FY2022.
Member B: I declare that the sum of $318,000 is a CGT exempt contribution. I intend to claim a tax deduction of NIL for contribution for FY2022.
Trustee writes: The trustee acknowledges that you intend to claim a tax deduction of NIL as contribution for FY2022.
This adds up to the $500,000 of deposit.
As an auditor, firstly, for CGT exemption claims, should I be given evidence that the deposit is a result of a CGT event, and that it is capital gains proceeds. Secondly, how can I verify his prior year CGT exemption claims so as not to exceed the life time limit of $500,000 per person. Or this is not within the scope of my audit?
There is a NAT 71161 form for this election with specific declarations. Is this a prescribed form that members must use for the declarations? Do the above 2 wordings comply with the legislation?
Does the trustee need to acknowledge that the contribution as being CGT exempt?
How does this type of contribution affect the transfer balance cap?
Your opinion would be much appreciated
Hi Stephen
Thanks.
Section 292.100 (of the ITAA) re making a contribution re a CGT small business concession states that:
"(9) To make a choice for the purposes of paragraph (1)(c), you must:
(a) make the choice in the * approved form; and
(b) give it to the * superannuation provider in relation to the * complying superannuation plan on or before the time when the contribution is made."
My view is that to be a valid contribution re a CGT small business concession the form has to be as per the NAT 71161 form that you refer to (being the "CGT cap election" form). Further I do not believe it is part of the audit scope to audit that the contribution is part of a CGT event or whether the life time limit has been exceeded.
There is no requirement for the Fund / trustees to have to acknowledge the receipt of a CGT cap election form or such a contribution.
In relation to CGT cap contributions these are not counted against the non-concessional contribution cap. In relation to the transfer balance cap if these contributions were converted into a retirement phase pension they count towards the pension cap.
A Fund / trustee has to acknowledge a contribution / valid notice where a member is claiming a deduction under section 290.170 of the ITAA.
To be able to claim a deduction for a personal contribution the approved form also needs to be completed as found in NAT 71121 (notice of intent to claim or vary a deduction for personal contributions). Guidance re what the ATO accepts can be found at:
Thanks
SMSF AAA