Speaking to SMSF Adviser, SuperConcepts general manager of technical services and education Peter Burgess explained that one of the major things that the Law Companion Guide (LCG) 2016/8 has provided clarity on is how the CGT rules will work for transition to retirement income streams. The LCG was released yesterday.
“Law Companion Guideline 2016/8 says that if you’re in an unsegregated fund and you have a transition to retirement income stream, then there is no requirement for you to commute that pension and move it back to the accumulation phase,” said Mr Burgess.
Previously, he said there was a view that if you didn’t do that before 1 July 2017, you wouldn’t be eligible for the CGT relief.
Mr Burgess said that in regard to segregated funds with transition to retirement income streams, the LCG appears to acknowledge that while technically some or all of its value should be transferred back to the accumulation phase on or before 30 June 2017, the CGT relief is intended to apply to this situation and the government is currently considering legislative options to clarify this.
“It’s very important that practitioners understand the difference between segregated and unsegregated funds because the way the CGT relief rules work is different depending on the way the fund is structured.”
Mr Burgess said it’s also important to understand that where there is only transition to retirement income streams or other account-based pensions in the fund, and no accumulation interests, the fund is a segregated fund for tax purposes by default.
Speaking to SMSF Adviser when the guidance was released, Perpetual's Colin Lewis encouraged professionals to be on the front foot with their clients’ portfolios when it comes to CGT, given its complexity, and that it is “definitely not one size fits all”.
“I wouldn’t be leaving it until June to get this sorted,” Mr Lewis said.
“There’s enough time now to get it sorted, but it requires a proper conversation with clients,” he said.
You can access the full guidance here.