Transitional CGT relief for SMSFs
Self-managed super funds can access Capital Gains Tax (CGT) relief to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the transfer balance cap, and Transition to Retirement Income Stream (TRIS) reforms, commencing on 1 July 2017.
The transitional CGT relief is designed to preserve the income tax exemption for certain, accrued capital gains which would have been exempt, if the underlying CGT assets had been disposed of before the changed treatment of TRIS’s and before a member transfers to comply with the transfer balance cap starting.
CGT relief is available for certain CGT assets held by a complying SMSF at all times between the start of 9 November 2016, to ‘just before’ 1 July 2017. However, the CGT assets eligible for the relief depends on whether they stopped being segregated current pension assets during this period, or whether the fund continued using the proportionate method for the 2016-17 income year.
Trustees need to be aware that CGT relief is not automatic – it must be chosen by a trustee for a CGT asset. SMSF trustees will need to review their fund’s circumstances and determine if CGT relief is available and appropriate. If trustees do decide to obtain CGT relief, trustees must advise the ATO in the approved form on, or before, the day they are required to lodge their fund’s 2016-17 income tax return.
As the decision is irrevocable, careful planning is required. Trustees should seek professional advice if they are unsure if CGT relief is suitable for their circumstances.