The changes to superannuation announced in the 2016 Federal Budget have been passed by Parliament. Amongst the changes was legislation which provides CGT relief for members who are transferring assets out of retirement phase in 2016/17 to comply with the changes. In essence, the legislation allows you to reset the cost bases of assets in your fund to their current market value.
The main issues that you need to consider because of the changes taking effect on 1 July 2017, include:
- Assessing the current circumstances of the fund including determining all your account based pensions or transition to retirement pensions.
- Reviewing if your fund was segregated and in receipt of a pension on 9 November 2016
- Segregation will occur if you have specific assets set aside for specific members or all of the assets of your fund are supporting pensions (100% pension phase).
- Reviewing if your account based pension will be near the $1.6 million transfer balance cap and determining if you will need to take action to get under this cap.
- Gathering information about the current cost bases of assets held in the SMSF.
- Considering when or if these assets will be sold and the fluctuations in market value they may have in the future.
- Determining which option of CGT relief is best:
- This could be choosing which assets to reset their cost base and paying any capital gain tax.
- It may be choosing which assets to reset their cost base and deferring any capital gain tax.
- Or it may be choosing not to reset any asset cost bases and not applying for CGT relief.
- Considering the future tax exempt make up of your fund. This includes whether:
- Members will be entering retirement phase in the future.
- Funds will be added to a member’s retirement phase in the future.
- Funds in accumulation phase will be reduced in the future.
The legislation and implications are complex so early planning and discussions with your clients are essential.
If you are concerned that the Government’s introduction of CGT relief will affect you on 1 July 2017, please feel free to give me a call to arrange a time to meet so that we can discuss your particular requirements in more detail.