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  • Transitional CGT relief

    A draft law companion guide (LCG) about capital gains tax (CGT) relief is now available on our website.

    CGT relief is available for self-managed super funds (SMSFs) to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the transfer balance cap, and Transition to Retirement Income Stream (TRIS) reforms, commencing on 1 July 2017.

    The transfer balance cap, initially $1.6 million, limits the amount of capital individuals can transfer to the retirement phase of their superannuation accounts. This in turn, limits the amount of superannuation fund earnings that are exempt from taxation. To prepare for this, individuals may need to reduce amounts currently supporting superannuation income streams so that they comply with the new requirements. They might do this by withdrawing amounts from the superannuation environment, or by transferring value from the retirement phase to the accumulation phase.

    The tax treatment of TRISs has also changed. Funds will lose the income tax exemption for assets supporting these income streams (and similar income streams) from 1 July 2017.

    Broadly, the transitional CGT relief is designed to preserve the income tax exemption for certain, accrued capital gains which would have been exempt, if the underlying CGT assets had been disposed of before:

    • member transfers to comply with the transfer balance cap starting
    • the changed treatment of TRISs.

    The transitional CGT relief is available for certain CGT assets held by a complying SMSF at all times between the start of 9 November 2016, to ‘just before’ 1 July 2017. However, the CGT assets eligible for the relief depends on whether they stopped being segregated current pension assets during this period, or whether the fund continued using the proportionate method for the 2016–17 income year.

    CGT relief is not automatic; it must be chosen by a trustee for a CGT asset. Trustees will need to review their fund’s circumstances and determine if CGT relief is available and appropriate. If CGT relief is chosen, the trustee will need to advise us using the approved form on or before, the day they are required to lodge their fund’s 2016–17 income tax return. The decision is final.

    For more information on the transitional CGT relief or the transfer balance cap, refer to the following Law Companion Guidelines we recently released:

    See also:

      Last modified: 16 Mar 2017QC 51374