Show download pdf controls
  • G, M and A Capital gains tax questions

    This section covers:

    For most CGT events a capital gain or capital loss is the difference between what it cost the SMSF to acquire an asset and what the SMSF received when it disposed of the asset.

    An SMSF's net capital gain forms part of its assessable income.

    Generally, an SMSF can disregard any capital gain or capital loss it makes on an asset it acquired before 20 September 1985 (pre-CGT). A capital gain or capital loss that a complying SMSF makes from a CGT event for a segregated current pension asset is also disregarded.

    If the SMSF makes a capital loss, the SMSF cannot claim it against income but can use it to reduce a capital gain in the same income year. If total capital losses exceed total capital gains for the income year, the SMSF has a net capital loss. The SMSF can generally carry the net capital loss forward and deduct it against capital gains in future income years. Net capital losses are applied in the order in which they are made.

    All SMSFs that have one or more CGT events during the income year must complete a Capital gains tax (CGT) schedule and attach it to the annual return if:

    • the total current year capital gains are greater than $10,000
    • the total current year capital losses are greater than $10,000, or
    • transitional CGT relief is applied.

    If you have current year capital losses, you may also need to complete a Losses schedule 2017.

    You can calculate the SMSF's net capital gain or loss using the:

    Transitional CGT relief for transfer balance cap and TRIS reforms

    SMSFs can use transitional CGT relief for temporary relief from certain capital gains that result from:

    • individuals complying with the transfer balance cap rules, or
    • Transition-to-Retirement Income Stream (TRIS) reforms.

    The transfer balance cap rules and TRIS reforms commenced on 1 July 2017.

    The transitional CGT relief applies to certain CGT assets held by a complying SMSF at all times from 9 November 2016 to 30 June 2017.

    CGT relief is not automatic. If you want to apply the relief to your SMSF:

    • you must do so on the 2017 CGT schedule
    • we must receive the 2017 CGT schedule on or before the day your SMSF is required to lodge its 2017 SMSF annual return.

    Your choice to apply CGT relief is irrevocable.

    For more information about eligibility rules and calculation of relief, see:

    • Transitional CGT relief
    • LCR 2016/8 Superannuation reform: transfer balance cap and transition-to-retirement reforms: transitional CGT relief for superannuation funds

    Do I need to report transitional CGT relief in the SMSF annual return?

    If you choose to apply transitional CGT relief to an asset, this creates a deemed 2016–17 CGT event. You:

    • must answer ‘Yes’ at G Did you have a capital gains tax (CGT) event during the year? (Section B)
    • must indicate on the 2017 CGT Schedule that you are choosing to apply CGT relief
    • may need to include the amount of the resulting capital gain or loss on both the 2017 SMSF annual return and the 2017 CGT schedule.

    The need for you to report this depends on whether:

    • the SMSF applied the segregated or unsegregated (proportionate) method in relation to the asset when calculating exempt current pension income (ECPI)
    • the deemed CGT event resulted in a capital gain or loss, and
    • you choose to defer a capital gain.

    If the asset was a segregated current pension asset, do not include the amount of the resulting capital gain or loss in the 2017 SMSF annual return. We disregard the capital gain or loss in this case.

    If the asset was an unsegregated pension asset and the deemed CGT event resulted in a capital gain, choose to either:

    • include the amount of that capital gain in the 2017 SMSF annual return, or
    • defer the capital gain until the asset is disposed of in a later income year.

    If you choose to defer the capital gain:

    • do not report the amount of the gain on the 2017 SMSF annual return
    • report the amount on the 2017 CGT schedule.

    If the asset was an unsegregated pension asset and the deemed CGT event resulted in a capital loss:

    • you cannot defer the capital loss, and
    • you must report the amount of the loss on the 2017 SMSF annual return.

    How to report a capital gain or loss in the SMSF annual return

    If you are required to report a capital gain or loss from the deemed CGT event in the 2017 SMSF annual return, you must report it according to general CGT event rules. For information about reporting a capital gain or loss in the SMSF annual return, see the instructions for the following:

    For information about reporting a capital gain from an unsegregated current pension asset on the SMSF annual return, refer to Self-managed super funds and tax exemptions on pension assets.

    Example: Transitional CGT relief applied to an unsegregated current pension asset and capital gain not deferred

    SMSF T used the proportionate method to calculate ECPI throughout 2016–17.

    SMSF T is eligible for CGT relief and the asset meets the criteria for the relief (for more information about eligibility, see LCR 2016/8 Superannuation reform: transfer balance cap and transition-to-retirement reforms: transitional CGT relief for superannuation funds).

    SMSF T held a commercial property valued at $500,000 on 30 June 2017. It acquired the property for $470,000 in 2011. Its capital gain from the deemed sale, using the discount method, (see Calculation methods) is $20,000.

    SMSF T chose to apply transitional CGT relief to the asset, but not to defer the capital gain.

    SMSF T had no other capital gains or losses in 2016–17.

    As a result of actuarial calculations, it was determined that 75% of SMSF T’s income was exempt current pension income (ECPI) for 2016–17. Therefore, of the $20,000 capital gain, $15,000 is exempt.

    In Section B of the 2017 SMSF annual return, SMSF T reports:

    G Did you have a capital gains tax (CGT) event during the year? Yes

    M Have you applied an exemption or rollover? No

    A Net capital gain $20,000

    Y Exempt current pension income $15,000

    End of example

    Foreign source capital gains

    An Australian super fund makes a capital gain or capital loss if a CGT event happens to any of its worldwide CGT assets.

    An SMSF that is not an Australian super fund makes a capital gain or capital loss if a CGT event happens to a CGT asset that is a taxable Australian property.

    For more information about CGT events, see Capital gains tax.

    G Did you have a capital gains tax (CGT) event during the year?

    Answer 'yes' if the SMSF:

    • had a CGT event occur during the income year
    • received a share of net income from a trust that includes a capital gain, or
    • is a subsequent participant in a forestry managed investment scheme and had a CGT event as a result of a harvest or a sale of an interest in the forestry managed investment scheme (see Forestry managed investment schemes).

    No

    Print X in the No box

    Yes

    Print X in the Yes box.

    M Have you applied a CGT exemption or rollover?

    Did the SMSF have capital gains disregarded or deferred as a result of applying a CGT exemption or rollover?

    No

    Print X in the No box

    Yes

    Print X in the Yes box. In the code box at M, print the appropriate code from table 2.

    If the SMSF has applied more than one CGT exemption or rollover and you are using software that allows it, select all of the codes that apply.

    If you are lodging on a paper return, print the code that corresponds to the CGT exemption or rollover that resulted in the largest amount of capital gain disregarded or deferred.

    If more than one CGT exemption or roll-over applies to the largest amount of capital gain disregarded or deferred, choose the most specific rollover or exemption code that applies. For example, choose the ‘Scrip for scrip rollover (Subdivision 124-M)’ code before the more general rollover ‘Replacement asset rollovers (Division 124)’ code.

    Do not report a Transitional CGT relief choice at M. If you have chosen Transitional CGT relief you must report it in the CGT schedule. See Transitional CGT relief for transfer balance cap and TRIS reforms.

    Table 2: CGT exemptions and roll-over codes

    Code

    Description

    A

    Small business active asset reduction (subdivision 152-C)

    B

    Small business retirement exemption (Subdivision152-D)

    C

    Small business roll-over (Subdivision 152-E)

    D

    Small business 15 year exemption (Subdivision152-B)

    E

    Foreign resident CGT exemption (Division 855)

    F

    Scrip for scrip roll-over (Subdivision 124-M)

    L

    Replacement asset roll-over (Division 124)

    M

    Exchange of shares or units (Subdivision 124-E)

    N

    Exchange of rights or options (Subdivision 124-F)

    O

    Exchange of shares in one company for shares in another company (Division 615)

    P

    Exchange of units in a unit trust for shares in a company (Division 615)

    Q

    Disposal of assets by a trust to a company (Subdivision 124-N)

    S

    Same asset roll-over (Division 126)

    X

    Other exemptions and rollovers

    For more information about CGT exemptions and rollovers, see Capital gains tax.

    A Net capital gain

    Did the SMSF have a net capital gain?

    The SMSF’s net capital gain is the total capital gain for 2016–17 less:

    • any 2016–17 capital losses
    • any prior year net capital losses and
    • any other relevant CGT discount or concession.

    No

    Leave A blank.

    Yes

    Print at A the SMSF's net capital gain.

    Show at A the amount of net capital gain calculated or transferred from:

    • 6A at part 6 of the CGT summary worksheet
    • A at part 6 of the CGT schedule, if any.

    When working out the SMSF's net capital gain, include:

    • net foreign source capital gains
    • the capital gains component of the SMSF's share of net income from a trust
    • the capital gains component of the SMSF's share of a distribution from a partnership
    • capital gains made by the SMSF from a forestry managed investment scheme (see Forestry managed investment schemes).

    If you include an amount at A that is exempt current pension income, include it also at Y Exempt current pension income.

    Non-arm's-length capital gains

    A net capital gain from the sale of an asset by the SMSF is non-arm's-length income if, for example, the asset:

    • was sold to a related party for more than the asset’s market value or
    • was originally acquired from a related party for less than the asset’s market value.

    Complying SMSFs do not include non-arm's-length net capital gains at A. Show these at Non-arm's-length income items U2 or U3.

    To calculate the SMSF’s net capital gain, see Capital gains tax.

    Example: Capital gains tax

    In 2016–17, SMSF A sold a house for $500,000. It bought the house for $470,000 in 2011. Its capital gain from this sale using the discount method (see Capital gains tax) is $20,000.

    SMSF A reports:

    G Did you have a capital gains tax (CGT) event during the year? Yes

    M Have you applied an exemption or rollover? No

    A Net capital gain $20,000

    End of example
    Last modified: 19 Feb 2018QC 51269