The ATO has finalised, previously draft, guidance on how the transitional CGT relief for superannuation funds works for the Transfer Balance Cap and Transition to Retirement Income Streams.
LCG 2016/8 Superannuation reform: transfer balance cap and transition-to-retirement reforms: transitional CGT relief for superannuation funds, previously LCG 2016/D8, has been finalised.
Update: The ATO has also finalised LCG 2016/9: Superannuation reform: transfer balance cap.
The Law Companion Guideline, which is an ATO Public Ruling, “provides guidance on the transitional CGT relief available for superannuation funds because of the transfer balance cap and transition-to-retirement reforms commencing on 1 July 2017”.
“CGT relief is available for 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,” says the ATO.
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 the ATO in the approved form on, or before, the day they are required to lodge their fund’s 2016–17 income tax return. The decision is irrevocable.”
LCG 2016/8 is the latest LCG finalised by the ATO coming from the changes to superannuation legislated late in 2016. Recently LCG 2016/11 Superannuation reform: concessional contributions – defined benefit interests and constitutionally protected funds was finalised. Several other superannuation-related LCGs remain at the draft stage:
- LCG 2016/D10: Superannuation reform: defined benefit income streams – non commutable, lifetime pensions and lifetime annuities
- LCG 2016/D12: Superannuation reform: total superannuation balance
- LCG 2017/D1: Superannuation reform: defined benefit income streams – pensions or annuities paid from non-commutable, life expectancy or market-linked products
- LCG 2017/D3: Superannuation reform: Transfer Balance Cap – Superannuation death benefits
“We intend to finalise further draft LCGs related to the super changes over the coming weeks,” says the ATO.