SMSF practitioners warned on timing traps with CGT relief
Due to the specific wording in the CGT relief legislation, SMSF clients who extend the lodgement of their tax returns could unknowingly miss out on the CGT relief, cautions BDO.
BDO partner of superannuation Mark Wilkinson says the legislation states that an election in regards to the CGT relief needs to be made at the time you are required to lodge the tax return.
This means that if the client is due to lodge a return but they get an extension for the lodgement of their return, their election for the CGT relief may not be within the required period.
“Now, we don’t know if the ATO will actually apply the legislation in that way but the language is fairly clear,” Mr Wilkinson told SMSF Adviser.
He said he suspects many accountants are probably working on the principle that they have to make the election before they lodge the return, and they could be lodging them late.
“This means they’ve made [the election] outside of that time frame. So I think that’s one area that needs to be watched fairly carefully. It’s not when you lodge the return, it’s when you are required to lodge the return,” Mr Wilkinson said.
If the election for the CGT relief is not made within the required period, the trustee may be regarded as not having made the election at all.
“This means their assets will retain their current market value and they could be subject to tax on the accrued capital gain to 30 June 2017,” Mr Wilkinson said.