Founder of SMSF consulting firm Insyt Darren Wynen says there may be some SMSF trustees who try to manipulate the new CGT rules and access the relief when they are not entitled to it.
Mr Wynen said this sort of tax avoidance activity could include wash sales, which the ATO has previously issued a ruling about, where the trustee sells a particular set of shares and re-purchases it in order to generate enough of a lift in the cost base to avoid paying tax.
“There’s no other reason for that transaction other than tax avoidance. So the ATO will be concerned if you’re buying and selling the same share and the only reason you’re doing that is because it’s exempt now before the new changes come in,” Mr Wynen told SMSF Adviser.
The ATO will also be watching for SMSF trustees who intentionally put themselves in a position to access the CGT relief, he said.
“For example, you may have never have used the segregated method and all of a sudden you’re segregated, and you use that method to try and get the CGT relief.”
Mr Wynen said the ATO could consider this to be a scheme where the trustee takes an asset and treats it as a segregated asset and then puts it back into accumulation.
“They’re washing [the asset] through, they’re segregating it and then washing it back to accumulation. So the ATO could say [they’ve] done a scheme to basically get the CGT uplift,” he said.
“The ATO is going to be busy in the lead-up to 30 June 2017. They might not catch you this year but down the track they’ve got access to titles information, they’ve got access to all the data from the ASX so it’s pretty easy for them to see the shares you’ve bought and sold on the same day, and they might send a questionnaire out.”
I believe you have to be segregated as at 9 November 2016 to use the segregated method to calculate the CGT relief. It would not be possible to become segregated now and apply the segregated method for CGT relief purposes.