DBA Lawyers director Daniel Butler says if an SMSF trustee has a segregated fund that is eligible for CGT relief, they may want to consider applying it before 9 May because of the risk that the CGT discount could disappear in the federal budget.
In a list of budget predictions, Tax Institute senior tax counsel Bob Deutsch rated a reduction or wholesale repeal of the CGT discount, including the 33-and-a-third per cent discount for superannuation funds, as one of the most likely measures to be adopted by the government.
“So if you were a betting person and didn’t like legislative risk like most people don’t, then [perhaps you] should you exercise your CGT election before budget night this year if you want to take advantage of the one-third CGT discount,” Mr Butler told SMSF Adviser.
He warned that SMSF trustees may otherwise run the risk of the legislation for a reduction or removal of the CGT discount passing on 9 May.
“It may be jumping at shadows because if there’s a change it might only apply to assets that were purchased after the 9th of May,” Mr Butler said.
“It is a risk [though] and that is the trouble with the government continually changing the rules all the time. People do take decisions to lock out legislative risk. The trust in the super system is at an all time low with the recent super reforms after we were all promised there would be no adverse changes without consultation.”
Mr Butler said the proposed change by Labor would remove the discount in respect of assets acquired after the date of change.
“They’ve said they won’t be retrospective so maybe [it won’t be an issue] but again I could not rule out that if there was a change, it was for disposals after a given date, rather than in respect of assets acquired after a given date.”
Segregated fund assets disregard any capital gain and, unsegregatef funds have a prescribed date of 30/6/17 for cost base reset so no action is needed pre budget.