SuperConcepts director and outgoing McPherson Super Consulting director Stuart Forsyth says there are certain things SMSF trustees might do in the administration of their fund that may cause issues with their ability to claim CGT relief.
Mr Forsyth reminded SMSF trustees, for example, that where a fund was unsegregated at the start of 9 November 2016 and becomes a fully segregated fund before 1 July 2017, the fund will not be eligible for CGT relief.
“For example, if a fund goes from having mum in pension and dad in accumulation, and dad starts his pension on 1 June 2017, so then they’re 100 per cent in pension, there is no CGT relief available for that fund.”
Another trap SMSF trustees may fall into, he warned, is where they decide to remove excess amounts above $1.6 million out of their super fund as a pension payment or lump sum.
“Say, I’ve got $1.8 million in my pension account and I’m the only member and I’ve been fully in pension for the whole year. If I take $200,000 out as a lump sum or a pension payment, then I won’t have to do anything on 30 June,” Mr Forsyth explained.
“Well, that’s fine, you can do that, but your fund will not get CGT relief because you were always a fully segregated fund, you didn’t need to roll anything back to accumulation because your balance went back to $1.6 million, because you took the $200,000 out.”
Mr Forsyth also stressed that the CGT relief stems directly from the need to comply with the transfer balance cap and the transition to retirement income stream changes.
“A lot of people talk about it as though it’s something separate from the transfer balance cap and the TRIS changes, whereas it’s not, it flows out of those. So your eligibility depends on what you have to do and what your status is,” he said.
“In broad terms, if you don’t have a transition to retirement income stream in place as of 30th of June and you’re not affected by the $1.6 million transfer balance cap, the fund won’t be eligible for CGT relief.”
Mr Forsyth added that while the extension for completing statements of advice from ASIC may be useful in terms of completing documentation for what’s already been done for clients, he cautioned advisers about using this extension to execute commutations past 30 June 2017.
“The point of an SOA is to make a recommendation and then execute the recommendation or not, depending on the instructions of the client,” he said.
“I had to have previously given [the client] the recommendations and [the client] had to have executed them, [so] you can’t really get an extension of time for the commutation.”