Year-end strategies may affect CGT relief

An SMSF technical expert has warned advisers to be mindful not to let the strategies they recommend to clients in regard to the super reforms compromise members’ ability to use some of the provisions in the new rules.

SuperConcepts technical services general manager Peter Burgess nominated member eligibility to access the capital gains tax (CGT) relief provisions contained in the 2016 budget bill as one area where advisers might be tripped up on that score.

“In the lead-up to 30 June, in the rush to get things done just make sure that you don’t do things that may compromise the client’s ability to claim CGT relief,” Burgess said.

“An example of where this could be relevant could be where you have a two-member fund, a husband and wife in the fund – the husband might be in pension phase and the wife might be in accumulation phase. It may be tempting before 30 June to move the wife into the pension phase if she retires so she can maximise the amount of tax-free income the fund derives.

“But if you do that before 1 July, it’ll mean the fund is not eligible for CGT relief.”

In addition, he cautioned against considering a strategy for a segregated fund of nominating different dates for different assets where the cost base would be reset as it would escalate the complexity of the process.

“If you have a portfolio and you have say 10 listed securities in that portfolio and you go through and have a different reset date for each one of those, it will require 10 different commutations,” he noted.

“It’s a point that hasn’t really been laboured in the industry, but obviously there may be a cost associated with that and it’s worth bearing that in mind when you’re making those decisions.”

He added he expected the majority of SMSFs to select 30 June 2017 as the date when the cost base reset would take place under the CGT relief provisions.

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