Tax legislation passed in 2012 ending the classification of superannuation assets as trading stock and in effect treating them as capital items can be advantageous for some SMSF portfolios, according to an SMSF specialist lawyer.
“Going forward, no super funds have trading stock and all assets are on capital account. What do we learn from that?” DBA Lawyers director Daniel Butler said.
“If someone was running a property development business, then it would be pretty good to include it in their SMSF because even though it’s in the super fund and they would be blatantly running a business, meaning the assets would effectively be trading stock, the assets would still be on capital account.
“It will really make a difference if the fund holds the property for more than 12 months because a capital gains tax discount will apply.”
Butler said the change in legislation could end up being counterproductive for the government from a revenue perspective.
“The government made that change to save revenue, but in the longer run it’s actually going to cost them because people can now pick up a tax discount that wasn’t available under the old rules,” he said.
He warned grandfathering rules included in the Tax Laws Amendment (2012 Measures No 1) Act 2012 would need consideration.
“So now land is not trading stock, but there are exceptions under the grandfathering provisions, which means you could still have trading stock within a super fund,” he said.
“This was announced in the 2011 federal budget, so as of 7.30 that night if you had land prior to that time, it still could be considered as trading stock.”
