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Regulations have been made amending the Superannuation Industry (Supervision) Regulations 1994 to account for changes to the tax law relating to CGT and earnout rights (being rights to future payments linked to the performance of a business or business assets following the sale of the business).
The amendments broadly treat these payments as being part of the original transaction for the sale of a business rather than relating to a separate asset for the purposes of CGT. This ensures that the tax system does not inappropriately discourage the sale of businesses subject to such rights as a way of facilitating transactions despite different expectations about the future performance of the business.
As the potential future payments can affect the size of the capital gain or loss from the sale, the amendments also broadly allow taxpayers to wait until all such payments have been finalised before accessing some CGT concessions.
These CGT concessions include the small business retirement concession that permits taxpayers to place the proceeds of the sale of their business into superannuation despite the normal contribution caps. However, in some circumstances, delaying making contributions may result in taxpayers being unable to make contributions, due to the restrictions in the SIS Regulations on when funds can accept contributions.
The Regulation creates an exception to the contribution restrictions, allowing funds to accept a contribution of an amount of the proceeds of the sale of a business to which the small business retirement concession applies. This is provided the sale involved an earnout right and the contribution would not have been affected by the contribution restrictions had it been made during the financial year in which the business was sold.