Self-managed super funds can access capital gains tax (CGT) relief to provide temporary relief from certain capital gains arising as a result of trustees complying with the super reforms commencing on 1 July 2017.
The CGT relief provisions have been made available 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 a member transfers to comply with the transfer balance cap (generally to reduce superannuation offsets in retirement to below $1.6m) and before the changed treatment of TRIS’s.
Transitional 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 depend on whether the fund uses the segregated or proportionate method for the 2016-17 income year.
Trustees need to be aware that CGT relief is not automatic - it must be elected by a trustee on an asset-by-asset basis. 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 contact our office if they are unsure if CGT relief is suitable for their circumstances.