In a recent blog post, the SMSF service provider’s executive manager of SMSF technical and private wealth, Graeme Colley, said while the rollovers could be useful in helping to defer capital gains as a result of a company takeover, for funds who used the cost base reset in 2017, any capital gains deferred as part of the reset would need to be declared at the time of the takeover.
“Scrip-for-scrip rollovers can be very useful in deferring a taxable capital gain where a takeover occurs,” Mr Colley said.
“However, if the shares were owned by a superannuation fund and the fund took advantage of the CGT cost base reset on 30 June 2017, any deferred taxable gain may end up being brought to account in the fund’s return at the time of the takeover.”
Mr Colley used the example of an SMSF with both accumulation and retirement phase interests which had purchased 2,000 shares in a company called Clisby Holdings for $20 in July 2016, and took up the CGT cost base reset on 30 June 2017, when the shares were then worth $50.
Using the proportionate method, it was calculated that the fund had a capital gain of $20, which it chose to defer until the shares were disposed of. However in December 2019, a second company, Footy Feeva, takes over Clisby Holdings and shareholders receive one Footy Feeva share, worth $150, in exchange for two Clisby Holdings shares.
The takeover qualifies for a scrip-for-scrip rollover concession, meaning the $100 capital gain the SMSF received from the takeover is disregarded; however, the $20 deferred capital gain from the CGT cost base reset in 2017 must be declared in the fund’s 2020 return, Mr Colley said.
“If the fund used the CGT cost base reset and the shares became eligible for the scrip-for-scrip rollover concession, the cost base of the shares in the takeover target would be their market value on 30 June 2017,” he said.
“The reason is that on that day, because of the fund accessing the CGT cost base reset, the relevant shares were deemed to have been disposed of and reacquired.”
