Technical expert clarifies CGT relief requirements for TRISs
Many SMSF practitioners and clients are still unclear on whether a segregated transition to retirement income stream needs to cease in order to be eligible for the CGT relief, according to a technical expert.
Darren Wynen from TaxBanter and Insyt says there still seems to be an incorrect belief that super members with a segregated fund must stop their TRIS in order to get the CGT relief.
Mr Wynen told SMSF Adviser that the recent legislative changes, which received royal assent on 22 June 2017, confirm that a TRIS does not have to stop in order to get the CGT relief.
Paragraph 1.143 of the explanatory memorandum states that for the deemed sale of an asset covered by the new condition, the time in which the asset is taken to be sold is the very end of 30 June 2017.
“What that is saying is that if the fund is segregated and paying a TRIS, the TRIS does not have to cease. It can continue on post 30 June 2017 and the fund will still get the CGT relief, but the timing of that relief will be at the very end of 30 June 2017,” Mr Wynen said.
He added that in terms of proportionate funds with TRISs, the ATO has already confirmed that members do not need to cease their TRIS.
Paragraph 41 of the Law Companion Guide 2016/8 specifies that the value of an interest supporting a TRIS does not need to be transferred to the accumulation phase where the fund continues to use the proportionate method during the pre-commencement period.
“What that’s saying is that if a fund is applying the proportionate method, then it does not need to cease the TRIS on or before the 30th of June 2017 in order to get the CGT relief. So if people are worried that they’re going to have to run out and stop these TRISs to be a trigger point for the CGT relief, that’s not correct,” Mr Wynen said.
He noted that with the segregated method, SMSF practitioners and trustees should be aware that while the cessation time is normally between 9 November and 30 June, if they rely on this new amendment, the cessation time will be 30 June 2017.
“What that means is that there’s less flexibility. So if the share prices are not good at 30 June, you’re just sort of stuck with whatever those values are at 30 June 2017.”