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  • What's new in 2016–17

    Foreign resident capital gain withholding tax

    Foreign resident capital gains withholding regime (FRCGW)

    From 1 July 2016, for contracts you entered into with a relevant foreign resident vendor, the foreign resident capital gains withholding regime (FRCGW) imposes an initial 10% withholding obligation on you for the purchase of:

    • taxable Australian real property such as land and buildings
    • indirect Australian real property interests
    • options or rights to acquire Australian real property and Australian real property interests.

    For more information, see Foreign resident capital gain withholding tax

    Limited recourse borrowing arrangement reporting

    Following the 2015 Murray Inquiry, there are no LRBA restrictions on SMSFs. However, the ATO monitors the risk and leverage of SMSFs and reports to Government. Consequently, we have added questions about the use of LRBAs and additional borrowings.

    You will find three additions to 16 V Borrowings to report LRBAs, temporary borrowings and other borrowings.

    If you report LRBA assets, you will give details of the financing arrangements used in LRBAs at 15e Limited recourse borrowing arrangements, A and B on the SMSF’s use of:

    • finance from licenced institutions
    • personal guarantees and other securities.

    For more information, see in these instructions:

    See also:

    Early stage venture capital limited partnership tax offset

    From 1 July 2016, an SMSF that is a limited partner of an early stage venture capital limited partnership (ESVCLP) may qualify for:

    • a non-refundable carry forward tax offset of up to 10% of their contribution to an ESVCLP. The ESVCLP must have become unconditionally registered on or after 7 December 2015. This includes an ESVCLP that was conditionally registered before this time and then became unconditionally registered on or after 7 December 2015.
    • a tax exemption for part of the capital gain or income from the disposal of investments that accrued to the end of the period ending six months after the end of an income year in which the investee’s value has first exceeded $250 million.

    The ESVCLP tax offset is shown at D1 in the Calculation statement.

    See also:

    Early stage investor tax incentives

    From 1 July 2016, investors who acquire newly issued shares in a qualifying early stage innovation company may qualify for:

    • a tax offset equal to 20% of the amount paid for the shares. This tax offset is capped at a maximum amount of $200,000 for each income year for the investor and their affiliates combined. The offset is not refundable, but can be carried forward to the next income year.
    • a modified CGT treatment under which the investor can disregard any capital gains made on the shares that have been continuously held for between one and ten years. Any capital losses on the shares held for less than ten years must be disregarded.

    The early stage investor tax offset is shown at D2 in the Calculation statement.

    See also:

    Transitional CGT relief for transfer balance cap and TRIS reforms

    Transitional CGT relief is available for SMSFs to provide temporary relief from certain capital gains that might result from individuals complying with the transfer balance cap, and Transition-to-Retirement Income Stream (TRIS) reforms, which commenced on 1 July 2017. It applies to certain CGT assets held by a complying SMSF at all times between the start of 9 November 2016, to ‘just before’ 1 July 2017.

    CGT relief is not automatic. It must be chosen by a trustee for a CGT asset. If CGT relief is chosen, the trustee will need to advise the ATO in the CGT schedule on, or before, the day they are required to lodge their fund’s 2016-17 income tax return. The decision is irrevocable.

    For more information, see Transitional CGT relief.

    Last modified: 19 Feb 2018QC 51269