Anyone who made extra-large super contributions leading up to the introduction of the new superannuation system should make sure to declare all capital gains tax (CGT) connected with the transaction. The tax office gave this warning in its 2007-08 compliance program released late last week.

See: http://www.ato.gov.au/content/downloads/87592_CP_Main.pdf

CGT could have been triggered by selling personally owned assets, such as investment properties and shares, to finance super contributions or by transferring listed shares or business real estate directly into SMSFs.

Under superannuation law, super funds are prohibited from acquiring most types of assets from their members; the main exceptions being listed shares and business real estate. (The assets may be transferred into the super fund as non-cash contributions or sold to them.)

A transfer (including a contribution) of a permitted asset into a super fund is regarded in tax law as a disposal by the owner who may be liable for CGT on past capital gains. And the transfer listed shares or business real estate into a super fund by a member must be at market value.

State and territory land title offices provide the tax office with details of all property transactions - which should reveal investment properties sold to make super contributions or transferred from fund members' names into SMSFs. As well, the tax office says it cross-checks extra-large contributions against fund members' personal income tax returns.

With all of the enthusiasm to make large contributions in the final months before the new super system, some fund members may have overlooked the possible CGT consequences of their actions. Professional tax advice is highly advisable.

A big proportion of the extremely large contributions were made into SMSFs.

A record number of SMSFs were established in 2006-07 - just under 46,000 new funds. In the June quarter, more than 11,400 were established - another record.