The changes to superannuation that have come from the 2016 Federal Budget are now law. Not since 2007 have we seen such significant changes to superannuation landscape. With change comes opportunities. Once such opportunity is the CGT Transitional Provisions. These provisions allow members of SMSF’s to transfer assets out of the retirement phase back to the accumulation phase prior to 1st July 2017 and benefit from CGT relief. In essence the CGT relief provides temporary relief buy resetting the cost base of asset(s) to their market value. It locks in the ‘CGT’ treatment of assets up to 30 June 2017 before the Transfer Balance Cop and changes to Transition to Retirement Income Stream (TRIS) rules apply.
Some of the issues that need to be considered prior to 1 July 2017 are as follows:
- Reviewing the current profile of your fund. i.e:
- What type of income streams are in effect in the fund?
- What is the current value of theses income streams?
- When did they commence?
- What is the taxation method used by the trustees of the fund to determine ECPI (Exempt Current Pension Income) of the fund? The two different taxation methods are segregated and proportionate.
- Depending on the taxation method used, gathering information on the cost base of assets currently held within the fund.
- Determining whether to make the election to apply the CGT relief and what asses(s) to reset to market value.
- Whether to bring to account in the current financial year or to defer to when the relevant asset(s) are sold.
The above list is nowhere near exhaustive. Rather it demonstrates the complexities behind these transitional provisions. Therefore, planning is essential so that you can potentially benefit from these transitional measures. Depending on your funds situation, the benefits can be substantial.
Discussions with your specialist SMSF advisor is essential. How can we help?
If you are concerned that the Government’s introduction of CGT relief will affect you on 1 July 2017. please feel free to give us a call to arrange a time to meet so that we can discuss your particular requirements in more detail.