Technical expert flags important detail with CGT withholding regime
SMSF professionals have been reminded that in-specie contributions and withdrawals from an SMSF above a certain threshold may be subject to the CGT withholding regime.
In an online article, SMSF Alliance principal David Busoli explained that even though a 12.5 per cent CGT withholding regime was introduced to catch foreign transactions, it requires the satisfaction of procedural obligations to exclude its application to any sale or acquisition of real property with a market value of at least $750,000.
It may also include transfers of shares or units in property-rich private companies and unit trusts, said Mr Busoli.
“Failure of the vendor to deliver a clearance certificate or vendor declaration to the purchaser, unless another exception is satisfied, requires the purchaser to withhold 12.5 per cent for payment to the ATO on or before settlement. If no, or reduced, tax is ultimately payable, the residual will be refunded to the vendor once their tax return is lodged but it is clearly preferable if it was not deducted in the first instance,” he stated.
“A clearance certificate is generally not required for transfers involving a deceased estate or family law.”
Mr Busoli reminded SMSF professionals that SMSF transactions are included under the regime and are not limited to a cash purchase.
“They include in-specie transactions – though an in-specie contribution by a member to their SMSF is unlikely to trigger the provision due to cap limitations. In-specie withdrawals are more likely to be included as the market value trigger rests with the SMSF vendor,” he explained.
“The $750,000 threshold applies to the market value of the asset. This will usually be the purchase price but non-arm’s length transactions that do not reflect market value can be adjusted by the ATO and also invoke NALI considerations.”
He also pointed out that a transfer of title involving SMSF trustee changes also falls under the CGT withholding regime provisions, which presents another argument in favour of corporate trustees.
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
