Don’t get ‘trigger happy’ with CGT relief, practitioners told
SMSF practitioners have been warned that the CGT reforms will not always be beneficial for SMSF clients and they need to carefully consider the timing of when members will retire.
The SMSF Academy’s Aaron Dunn says it will not always be appropriate to apply the CGT relief for SMSF clients, adding that SMSF practitioners need to consider the potential timing of other members moving into retirement phase and the amounts they have that will be applied against their transfer balance cap.
“[For example], you don’t want to apply for the CGT relief in the future if the fund’s going to be 100 per cent in pension phase,” Mr Dunn said.
This may also be the case with certain TRIS members.
“They might lose their exemption now, but if they’re going to start a TRIS and they have $1.2 million TRIS now and they’re three years from retirement, well, they’re going to be 100 per cent tax exempt in the future, assuming they’re going to be under the $1.6 million cap. So don’t get trigger happy with CGT relief amounts,” Mr Dunn said.
However, if the client does have a TRIS that is greater than the $1.6 million, it will be in the client’s best interest to apply the CGT relief, Mr Dunn said.
“In the future, they’re going to be restricted as to what they can actually move into retirement phase,” he said.
“The relief now is going to maximise the tax exemption that’s available to [the] fund and produces a lower notional gain for them.”
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 has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.