February 2018

01-Mar-2018

Selling solar energy in your Superannuation Fund

Q:
My client has a property owned by their family trust being rented to a related party. Can their superannuation fund spend $50,000 to purchase some solar panels and charge for the electricity generated?

A: The short answer is yes but only if the net assets of the fund are greater than $1,000,000. As the commercial property is not owned by the fund the fund will effectively be leasing plant and equipment to a related party and not business real property, the asset will therefore be treated as an in house asset and therefore the value will need to be less than 5% of the funds assets. Care should be taken where the investment will be close to the 5% limit as a drop in asset value of other assets could cause this investment to exceed the 5% limit.

Replacement Asset under the Small Business Roll-over Relief

Q: What type of assets qualify as a replacement asset for Small Business Roll-over Relief purposes?

A: The replacement asset (or the fourth element expenditure of a CGT asset) must be an active asset. This may include a car or a depreciating asset, but not trading stock. Shares or trust interests can qualify provided they are active assets (e.g. they must generally satisfy the 80% test) and the taxpayer or a connected entity is a CGT concession stakeholder in the company or trust. If the taxpayer is an interposed entity, the CGT concession stakeholders together must have a direct or indirect small business participation percentage of at least 90% in the taxpayer. 

Capital Work Deductions and Clawback Provisions

Q: If a taxpayer who purchased an existing property does not have the information regarding the construction costs incurred by the original owner and, as a result, does not claim any capital work deductions, is he/she subject to the clawback provisions?

A: Strictly speaking, the clawback provisions (e.g. the cost base is reduced to the extent the capital work deductions could have been claimed) still apply even if the taxpayer does not have the information and is therefore unable to claim a deduction. However, under Practice Statement PS LA 2006/1 (GA), the Commissioner will not apply the provisions where the taxpayer can demonstrate he does not have the information on the construction costs and does not seek to deduct any amount in relation to the expenditure.