Speaking at a Townsends Business & Corporate Lawyers event, PwC director of private clients Liz Westover said the timing of any additional contributions made between now and 30 June could be critical to the CGT relief.
Ms Westover said SMSF practitioners need to talk to their clients and review what has been happening in their funds.
“We’ve spoken to a number of people who have said, ‘Yes, no worries, we’re in pension phase’, then there have been some small or minor contributions that have gone in throughout the year, which means the fund is not segregated,” she warned.
“So you really need to make sure you know what’s going in on the fund.”
Ms Westover said practitioners will need to look at the timing of any additional contributions the client plans to make and how that might impact the CGT relief.
“For example, if I think I’m 100 per cent in pension phase, so I’m deemed to be segregated, and I want to make an extra contribution of $540,000, then that’s actually my cessation date because my assets are no longer segregated, so you need to be careful around the timing,” she said.
Mr Westover said there are strategies to overcome this issue if the client does want to make a contribution.
“You might be able to write a minute that says ‘I’m not going to be under the deemed segregated approach’, so then you’re making the decision that those assets are going to be segregated and then you’re just dealing with the $540,000 and what you actually do with that contribution,” she said.
“Now, that might impact on your ECPI calculations at the end of the year. But the timing of these transactions is going to be everything. So be really careful that by making contributions you’re not inadvertently changing your CGT strategies and what you can actually do there.”
Something that is currently a point of contention, Ms Westover said, is whether super members that had assets that were in the accumulation phase at 9 November, and then commenced a pension were actually eligible for CGT relief.
“What [I’m hearing…] is that you can actually commence an income stream anytime now and still be eligible for the CGT relief,” she said.
“Now the catch around that is, is that if I start an income stream now and cease it on the 30th of June, then the commissioner may come and knock on your door, but if you are genuinely starting and income stream, and you can demonstrate that’s what you would have done this time, then potentially you could claim the CGT relief and be eligible for it,” she said.
Ms Westover stressed this would purely only be for unsegregated assets, because the legislation stated that you had to be segregated at the 9th of November to claim the relief for the segregated approach.
“What I suggest though is that before you go and tout that one out to your clients that we wait on the confirmation from the tax office, the law companion guidelines are still all in draft form and we’re still waiting for the finalisation on that in the LCGs that have come out,” she noted.