Effect of applying CGT relief

The deemed sale when CGT relief is applied creates a capital gains event for that asset, and when the assed is deemed to be repurchased it has the effect of being a new asset for CGT purposes.

This means you will need to hold the asset for at least 12 months after this time to qualify for the CGT discount. Also, the indexation method for assets originally acquired before 21 September 1999 will no longer be available.

The deemed sale and repurchase only has consequences for capital gains tax – it is not considered an acquisition of an asset for any other purpose (such as the superannuation regulatory consequences of acquiring assets from a related party).

For assets like shares or units, CGT relief can apply at the parcel-to-parcel level, meaning the trustee can choose which particular shares in an overall holding to reset the cost base for. Note that for unit trusts, CGT relief applies to the units, and not the underlying assets held by the trust.

Making a CGT relief election

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 us using the approved form by completing the CGT schedule to the 2016–17 SMSF annual return on or before the day they are required to lodge. The lodgement date for 2016–17 SMSF annual return has been extended to 30 June 2018 for all SMSFs. This means trustees have until 30 June 2018 to lodge a return with an election for CGT relief, or amend a previously-lodged return in order to include an election if you hadn’t made it previously.

You need to keep appropriate records for each asset subject to the CGT relief and any deferred tax liability in accordance with your record keeping requirements.

How do I make the choice?

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

• answer ‘Yes’ at label G 'Did you have a capital gains tax (CGT) event during the year?' (Section B: Income, Question 11 label G) in the Self-managed superannuation fund annual return 2017
• indicate on the 2017 CGT Schedule that you are choosing to apply CGT relief.

You may need to include the amount of the resulting capital gain or loss on the 2016–17 SMSF annual return and the 2017 CGT schedule.

To report the CGT relief election into the CGT schedule you will need to complete the following fields:

• the election to apply for CGT relief (Question 8 label F)
• any deferred amount (Question 8 label G).

It is important to note that this means many funds which would not currently expect to complete the CGT schedule will need to do so if they wish to make an election to defer the CGT.

Making a choice is final

Once you have chosen to apply the CGT relief, the decision is not able to be revoked. If you lodged the 2016–17 SMSF annual return without making the election, you can amend the return within the time limits to make it. However you cannot amend to reverse the election once it has been made.

Find out about:

• For more on transitional CGT relief, refer to LCR 2016/8 Superannuation reform: transitional CGT relief for complying superannuation funds and pooled superannuation trusts
• For more on how to make the choice in lodging your 2016–17 SMSF annual return, refer to Self-managed superannuation fund annual return instructions 2017

See also:

• Claiming ECPI
• Transfer balance cap (including what counts towards your cap)
• LCG 2016/8A1 – Addendum Superannuation reform: transfer balance cap and transition-to-retirement reforms: transitional CGT relief for superannuation funds
• LCR 2016/9 Superannuation reform: transfer balance cap
• LCR 2016/10 Superannuation reform: defined benefit income streams – non-commutable, lifetime pensions and lifetime annuities
• LCR 2017/1 Superannuation reform: defined benefit income streams – pensions or annuities paid from non-commutable, life expectancy or market-linked products