CGT relief and the general anti-avoidance rules
As previously noted, the CGT relief provisions have an intended purpose. Therefore, schemes designed to maximise an entity’s CGT relief or minimise the capital gains of existing assets in accumulation phase may be subject to the general anti-avoidance rules in Part IVA of the Income Tax Assessment Act 1936. An example would be creating the circumstances to give access to CGT relief.
The kinds of arrangements that the Commissioner will scrutinise carefully with a view to determining whether Part IVA applies will exhibit the following features:
- they place the taxpayer in a position to make the choice
- they go further than is necessary to provide temporary relief from CGT because members are complying with the reforms commencing, and
- they demonstrate that the dominant purpose of entering into the arrangement is to avoid tax.
- LCR 2016/8 Superannuation reform: transitional CGT relief for complying superannuation funds and pooled superannuation trusts (refer to paragraphs 42 to 50C for more information on the transitional CGT relief and anti-avoidance)
Criteria for eligibility for CGT relief
If you choose to use CGT relief, the way it will apply depends on the method you were using to calculate your ECPI at the start of the ‘pre-commencement period’. The pre-commencement period is from 9 November 2016 to 30 June 2017.
You may have calculated your ECPI by selecting specific assets to support your income streams (known as the segregated method), or by allocating a percentage of your income streams (known as the proportionate method).
If all members of the fund are receiving account-based income streams, and 100% of the fund’s assets are supporting these income streams, the assets will meet the definition of segregated current pension assets. This is known as being ‘100% in pension phase’. In this situation, we accept that the fund is using the segregated method, even though it doesn’t specifically identify its assets as segregated to support a particular income stream.
Some criteria must be met in all situations:
- your fund must have held the asset throughout the entire pre-commencement period
- your fund must have been a complying superannuation fund from 9 November 2016 until the date relief is applied.