ATO provides clarity on CGT timing for segregated funds

The ATO has clarified the date the CGT relief will apply from for a segregated fund where a trustee has made a contribution this year but plans to commute the excess amounts over $1.6 million at a later point.

In an ATO webinar, ATO director of technical leadership Helen Morgan said where a fund’s only superannuation interests are account-based pensions, the fund’s assets will all meet the definition for segregated current pension assets, since the fund is holding them solely to support those pensions.

If a fund makes a contribution into the fund, however, it will have an accumulation interest and the fund will move out of the segregated method.

“That could result from a member returning to the workforce for a short period of time and they’re still eligible to make contributions or where they have come into an entitlement or a position where they can now make a contribution again without exceeding their caps,” Ms Morgan explained.

However, this has caused some confusion about the date the CGT relief would apply where a fund makes a contribution and stops being segregated but plans to commute the excess amounts above the $1.6 million into accumulation at a later point in the financial year.

“The relevant date for CGT relief is where a fund switches from the segregated method to the proportionate method and the relevant date in that instance is the date where the assets cease being segregated current pension assets,” Ms Morgan said.

This means the SMSF trustee would reset the cost base on all the eligible assets for CGT relief at the time the contribution was made. 

“This is provided that the member does comply with the transfer balance cap or TRIS reforms. It’s not sufficient just to be currently segregated, and make a contribution to the fund and not have to do anything in order to comply with the superannuation reforms going forward,” Ms Morgan said.

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