Speaking to SMSF Adviser, Cooper Partners director Jemma Sanderson said one of the biggest traps facing SMSF practitioners with the CGT relief is the eligibility criteria for the relief.
The law makes it clear, she explained, that a member has to be impacted by the transfer balance cap provisions, or have a transition to retirement pension in place and no longer receive the pension exemption from 1 July 2017, in order to use the concession.
“Some people are potentially misinterpreting that from the perspective of saying ‘well I'm in pension phase, and therefore I'm eligible to claim when they actually have less than $1.6 million, in retirement phase’.”
“There are also other people, who thought they were in transition to retirement phase, but actually they met a condition of release with a nil cashing restriction, so potentially they may be ineligible to use the relief because their transition to retirement pension may actually be in retirement phase already.”
There is also confusion in determining what type of relief the member is eligible for.
“Is it from an unsegregated fund perspective, or is it from a segregated fund perspective? Even those sorts of considerations are substantial because it is based on the position that the fund was in at 9 November 2016,” she explained.
“So for some people, where 100 per cent of the fund was in pension phase at the start of the 2016/17 year, and continued to be so at 9 November, then as of 9 November they would be deemed to be a segregated fund, and so one particular provision of the act applies.”
If they made a contribution to the fund subsequent to that time, she said, then the date of the contribution would actually be the date that the CGT relief applies.
“Its little nuances like that, that people need to be mindful of.”