SMSF practitioners are well placed to assist clients handle capital gains tax (CGT) changes announced in the federal budget as they are based on similar laws introduced when alterations were made to the transfer balance cap, a superannuation lawyer has noted.
DBA Lawyers special counsel Bryce Figot said the proposal in the budget to apply a cost-base indexation for gains that accrue from 1 July 2027 meant at some point in the future some taxpayers would be required to choose a method to determine the value of their CGT assets.
Figot noted two options would be available, one which would use a legislative instrument yet to be made that determined a method of apportioning gains after the sale of an asset or the second option under which individuals would have to determine the value of all CGT assets as at 30 June 2027.
“That option sounds a little like the ‘disregard initial capital gain but recognise deferred notional gain’ we got nine years ago when the government introduced the transfer balance cap,” he said, noting the explanatory memorandum (EM) to a bill before parliament to make these changes stated the same.
“The EM says: ‘The rules applying to the first component (the notional gain just before 1 July 2027) deem CGT events and capital gains or losses to have occurred. They are modelled on section 294-115 of the Income Tax Transitional Provision Act for consistency of approach.’
“If they sound similar, it’s because they are similar.
“Nine years ago, SMSF members had this complex system thrust upon them. Now most taxpayers are going to have an equivalent complex system thrust upon them.”
As such, he said SMSF practitioners could fall back on their past experience and knowledge when dealing with the bifurcated notional gain approach, including for non-SMSF clients who may have purchased shares over different time periods and need to arrive at a valuation figure for CGT purposes.
“An action point is to offer for individual clients and non-SMSF trust and partnership clients packages that record all of their CGT assets and the deferred gain,” he said.
“[Create] some sort of package they can use and even if they leave you, they can then take that to another accounting firm.
“That would be a very valuable consulting service that you could offer.
“It is a really good business opportunity and very valuable for people who have been acquiring shares via dividend reinvestment plans where they have got assets with lots of different acquisition points.
“As SMSF practitioners, you are uniquely well placed in Australia to handle this because you have already handled the thing these rules are based on nine years ago and have seen the practical fallout and the difficulties that arise from it.”
Jason Spits
SENIOR JOURNALIST
Jason is a senior journalist with Benchmark Media and writes for the selfmanagedsuper website and magazine and smstrusteenews website. He has covered financial services since 1999 and has written about life insurance, superannuation, investment management and financial advice, in both a freelance and in-house capacity, and also did a brief stint as a media manager for an industry association. He has been the editor of trade titles Money Management and Financial Standard, and was most recently senior journalist with life insurance title Riskinfo.
Articles by Jason