With tax statements coming in for last financial year, we are starting to field CGT Relief queries for eligible funds.
The CGT relief allows trustees to elect to reset the cost base of assets that will no longer be eligible to support tax-exempt superannuation income streams from 1 July 2017 to their market value. This option is available to clients that are:
- required to commute pensions to comply with the $1.6M transfer balance cap, or
- were in receipt of transition to retirement income streams last financial year.
Trustees should seek advice as to which assets are eligible for CGT Relief and which method can be applied under a segregated or unsegregated approach. The election to apply for CGT relief was not required to be made by 30 June 2017 and trustees can make the election in the annual tax return CGT schedule.
What is important to note is that the election must be made on or before the 2016/17 income tax return is due for lodgement.
The tax return lodgement date for SMSFs where one or more prior-year tax returns are outstanding at 30 June 2017 is 31 October 2017. Therefore, we urge you to review your clients immediately who are looking to apply for CGT relief and had any prior tax returns outstanding at 30 June 2017. If this applies to any of your clients, you should contact the ATO prior to 31 October 2017.
CGT relief is not automatic and needs to be made in the approved form in the 2017 CGT Schedule:
Tax return – select yes
From CGT Schedule – under F select yes if applying for CGT relief (under either method) and only put in dollar amount if using unsegregated amount and deferring gain (otherwise will be nil)
A schedule of assets is not required to be submitted to the ATO but should be retained by trustees as part of their fund records and available for ATO inspection if requested.
If this article has raised questions regarding your clients and any of the above issues, contact John Lethbridge, SMSF Specialist Advisor on 1800 333 143.