In an era where there are significant restrictions on the amount of money that is able to be contributed into superannuation, advisors are acutely aware of the ability of an individual to contribute lump sum amounts into superannuation by applying the Small Business 15 year exemption or the Small Business retirement concession.

Where the Small Business 15 year exemption is applied, a taxpayer is able (but not obliged) to contribute up to $1,455,000 of the capital proceeds from the CGT event into superannuation under the Small Business CGT contribution cap.  Where the Small Business retirement concession is applied, an individual over 55 is able (but not obliged) to contribute up to $500,000 of a capital gain into superannuation under the Small Business CGT contribution cap.

However, in order to make any superannuation contribution at all, a taxpayer may need to firstly satisfy the work test pursuant to the SIS Regulations.  Specifically, a superannuation fund cannot accept a superannuation contribution from an individual aged between 65 and 74, if the individual does not satisfy the work test for the financial year (broadly representing at least 40 hours of gainful employment within a 30 consecutive day period).

For individuals aged between 65 and 74, this means that where the Small Business CGT concessions are applied in a particular financial year resulting in the individual ceasing to be employed in any gainful employment thereafter (eg the taxpayer sold their business and retired in the prior financial year), the individual will not be able to contribute funds into superannuation in the following year using the Small Business CGT contribution cap (i.e. irrespective of having satisfied the criteria of the Small Business 15 year exemption or the Small Business retirement concession).

If on the other hand individuals aged between 65 and 74 continue to consult to the new business owners in the following financial year, the individual may still satisfy the work test and be eligible to contribute funds into superannuation using the non-concessional contribution cap for the Small Business 15 year exemption or the Small Business retirement concession.