Practitioners told to watch for division 293 triggers

With the threshold for the division 293 tax reducing to $250,000, SMSF practitioners will need to pay close attention to strategies that trigger a capital gain and potentially push the client above the threshold, says Colonial First State.

Colonial First State executive manager Craig Day says the reduction in the threshold for the division 293 tax from $300,000 to $250,000 from 1 July 2017 will mean that many more clients will be paying this tax.

Therefore, SMSF practitioners should be aware of any strategies that may trigger the division 293 tax.

“Yes, they’re looking at your income which includes your salary, but that income would also include something like a capital gain on a property,” Mr Day said.

“If you’re looking at selling an investment property or you’re looking at transferring some listed shares into an SMSF, if that triggers a capital gain, then that may actually push you up and over the $250,000 limit.”

SMSF practitioners and trustees will need to take into account the extra tax that has to be paid on contributions when they consider whether they want to pursue a particular strategy.

“In terms of strategies or what people can do about the [division 293 tax], there’s not much you can do about it at all,” Mr Day said.

“The income test is quite comprehensive so you can’t go and do negative gearing or anything like that and expect to get around it because they’ll just simply add back the net investment losses.”

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