CGT relief

There are transitional provisions to provide Capital Gains Tax relief. You are able to reset the cost base of assets reallocated from the retirement phase to the accumulation phase prior to 1 July 2017.

This relief is available for providers in respect of the assets held for individuals who choose to transfer amounts from the retirement phase to the accumulation phase to comply with the transfer balance cap or new transition to retirement income stream arrangements.

Where these assets are already partially supporting accounts in the accumulation phase, tax will be paid on this proportion of the capital gain made prior to 1 July 2017. This tax may be deferred until the asset is sold, for up to 10 years.

If the relevant asset is sold before 1 July 2027, the deferred notional gain is added to any further net capital gain (or loss) made on sale. This further capital gain is calculated based on the higher cost base determined as at 30 June 2017 being the market value.

If not deferred, the fund must add this notional gain to its net capital gain (or loss) for 2017 which effectively crystallises the tax liability that would have arisen if that asset had been sold in 2017.

Where the fund has not disposed of the asset within 10 years (before 1 July 2027), the notional gain ceases to exist and the cost base of the asset will revert to its original cost.

30 June, 2017 Valuations

Where a person is a member of a SMSF, they may not know the value of their pension account until several months after the end of the financial year when the funds annual return is completed. In this case, members will need to estimate the amount that needs to be commuted by 30 June 2017 and once the actual balances are known make further commutations if necessary. Under the transitional rules, as long as they do not exceed the transfer balance cap more than $100,000 and they commute the excess within 6 months, the excess amount will be disregarded.