Issue
Does the exception in paragraph 104-60(5)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to the transfer of assets from one superannuation fund to another superannuation fund?
Decision
No. As the terms of both trusts are not the same, the exception in paragraph 104-60(5)(b) of the ITAA 1997 does not apply.
Facts
The assets of one superannuation fund were transferred to another superannuation fund in November 2000. The transferee fund was established under a new deed executed on 1 November 2000.
The terms of the trust deeds of both funds varied considerably. For example, the new deed includes clauses relating to trustee's powers, employer contributions, members' dependants and investments.
Reasons for Decision
Under subsection 104-60(3) of the ITAA 1997 a capital gain may arise from the transfer of assets from one superannuation fund to another fund (CGT even E2).
There are two exceptions that prevent CGT event E2 from happening. The first exception covers the situation where the taxpayer is the sole beneficiary of the trust (other than a unit trust) and the taxpayer is absolutely entitled to the asset as against the trustee (disregarding any legal disability): paragraph 104-60(5)(a) of the ITAA 1997. The second situation occurs when the trust is created by transferring the asset from another trust, and the beneficiaries and the terms of both trusts are the same: paragraph 104-60(5)(b) of the ITAA 1997.
The first exception does not apply as the member is not absolutely entitled to the assets of the fund as against the trustee. The second exception also does not apply as the terms of the trust are not the same.
Accordingly, CGT event E2 will occur and the taxpayer will be assessed on any capital gain arising from the transfer of assets from one superannuation fund to another.