Capital gains tax relief - start planning now
The changes to superannuation announced in the 2016 Federal Budget have been passed by Parliament.
Amongst the changes was legislation which provides CGT relief for members who are transferring assets out of retirement phase in 2016/17 to comply with the changes.
In essence, the legislation allows you to reset the cost bases of assets in your fund to their current market value.
The main issues that you need to consider because of the changes taking effect on 1 July 2017, include:
- Assessing the current circumstances of your fund including determining all your account based pensions or transition to retirement pensions.
- Reviewing if your fund was segregated and in receipt of a pension on 9 November 2016
- Segregation will occur if you have specific assets set aside for specific members or all of the assets of your fund are supporting pensions (100% pension phase).
- Reviewing if your account based pension will be near the $1.6 million transfer balance cap and determining if you will need to take action to get under this cap.
- Gathering information about the current cost bases of assets you currently hold in your SMSF.
- Considering when or if these assets will be sold and the fluctuations in market value they may have in the future.
- Determining with your advisor which option of CGT relief is best for you:
- This could be choosing which assets to reset their cost base and paying any capital gain tax.
- It may be choosing which assets to reset their cost base and deferring any capital gain tax.
- Or it may be choosing not to reset any asset cost bases and not applying for CGT relief.
- Considering the future tax exempt make up of your fund. This includes whether:
- Members will be entering retirement phase in the future.
- Funds will be added to a member’s retirement phase in the future.
- Funds in accumulation phase will be reduced in the future.
The legislation and implications are complex so early planning and discussions with your specialist advisor are essential.
“The legislation provides CGT relief for members who are transferring assets out of retirement phase in 2016/17 to comply with the changes.”
How can we help?
If you are concerned that the Government’s introduction of CGT relief will affect you on 1 July 2017, please feel free to give me a call to arrange a time to meet so that we can discuss your particular requirements in more detail.
Cayle Petritsch
SMSF Specialist Advisor
T: 02 9984 7774
E: caylep@nac.com.au
Martin van der Saag
Director
T: 02 9984 7774
E: martinv@nac.com.au
“Early planning and discussions with your specialist advisor are essential because the legislation and implications are complex.”
About the author
Marius Fourie - Director & Business Advisor
As Director and Business Advisor, Marius uses his accounting expertise and empathetic skills to work directly with business owners and help them feel at ease with their finances.
Marius saw a common need in clients that just wasn’t being met by accounting providers.
That need was for clear, open communication and streamlined accounting services that didn’t come padded out with any unnecessary features.
Business owners just don’t have time to compare different accounting firms to see which one has the best packages with the best inclusions (many of which they would pay for but never use).
Key Takeaways
CGT relief was introduced to help superannuation members transition assets out of retirement phase with more flexibility.
This relief allows the cost base of assets to be reset to current market value, which can reduce future capital gains.
The changes became effective from 1 July 2017 following passage of the relevant legislation.
Members were encouraged to plan ahead for tax year implications tied to these amendments.
Proper planning is crucial because the legislative rules and interactions with super transfer caps are complex.
Members need to evaluate multiple factors — such as existing pension phases and asset values — before electing relief.
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Frequently Asked Questions
What is the capital gains tax (CGT) relief introduced in this context?
The relief refers to special legislative amendments that allow certain super fund members to reset the cost bases of assets to current market value when transferring them out of retirement phase during the 2016/17 year.
Who does this CGT relief apply to?
It applies to members of SMSFs (self-managed super funds) who are moving assets out of retirement phase in the relevant period and need to align with superannuation changes introduced by the Federal Budget.
Why might resetting the cost base of an asset be beneficial?
Resetting the cost base to market value can reduce the taxable capital gain on future disposal, offering a strategic tax advantage compared with using the original historic cost.
When did these CGT relief provisions take effect?
The provisions took effect on 1 July 2017, as part of legislative changes passed by Parliament following the 2016 Federal Budget.
What should members consider before electing to use this CGT relief?
Members should assess current fund circumstances — including existing pension phases, whether funds are segregated, the total value relative to transfer balance caps, and market values of assets — and seek advice before making a decision.
Who may be eligible for this CGT relief?
The relief applies to members who are transferring assets out of retirement phase in 2016/17 to comply with the updated superannuation rules.
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