Despite the finalised guidance on CGT relief, the boundaries between what an appropriate use of CGT relief is and what is considered tax avoidance still remains uncertain, according to one technical expert.
Miller Super Solutions founder Tim Miller says while the finalised law companion guides have provided value for SMSF practitioners, in some cases these guides should go further in providing more examples and better defining the ATO’s view.
This is especially the case with the finalised version of the CGT relief guidance, according to Mr Miller, which the ATO said would include extra examples compared with the draft version of the guidance.
“This wasn’t really the case. However, there were one or two extra examples but they were scenarios that most people already understood,” he told SMSF Adviser.
“I don’t necessarily think that this is the ATO’s intention, but there’s concern from an industry point of view when applying CGT relief around how much is too much.”
While, on face value, the law says the relief can be applied to all assets of the fund, Mr Miller said a closer reading of the legislation may show that the relief can only be applied to amounts in excess of the transfer balance cap.
“Whilst the final LCG was implicit in saying that it’s not exclusively available in those circumstances, they’re pretty quick to then follow that up with the anti-avoidance section,” he said.
“So they lead you down one path to say that it’s all okay to be able to apply the relief, but then they’ve said, ‘By the way, if you do more than you need to, it could be an issue.’”
Mr Miller said he suspects most SMSFs with a transfer balance cap issue or a transition to retirement income stream issue, whether they’re segregated or not, will apply the relief to all the assets of the fund.
“But should you be doing that if you’ve got unsegregated assets because what deferred tax liability or what current tax liability are you creating?”
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