The decision to take advantage of the capital gains tax (CGT) relief provisions contained in the super reforms legislation and defer the associated tax liability may pose problems for advisers who are servicing certain clients for the first time, the director of an advisory firm has said.
“For [most advisers] that might not be a big issue that you’re going down the path of deferral for your clients, but you know that in a few years’ time you’re going to pick up a new client where that deferral may have been claimed but hasn’t been accounted for correctly, wasn’t reported correctly, or you pick up a new fund where the tax was deferred, then the asset was disposed of, and then that tax liability wasn’t brought to account and you’re picking it up a few years later,” Cooper Partners director Jemma Sanderson told the Tax Institute Superannuation Conference recently held in Sydney.
According to Sanderson, the deferral of the CGT tax liability was a decision requiring careful consideration.
To that end, Cooper Partners was only implementing the strategy in select situations.
“As a general rule of thumb we are not really looking at deferral in our client base unless there is a substantial accumulation account in that fund in that particular year,” she said.
In reality, advisers needed to weigh up the benefit a client would get from deferring the tax liability and that decision would often be determined by the dollar amount involved and the associated complexity, she said.
“It might be a case where we can defer that particular gain, but all we’re saving is a $6000 tax liability. So paying it now means you get less of a refund of franking credits, it means you’ve reset the cost base of those particular assets and you don’t have that deferral hanging over your head,” she noted.