The object of the CGT relief provisions is to provide temporary relief from certain capital gains that might arise because of complying with the introduction of the transfer balance cap, or the TRIS reforms.
Unfortunately, the ease of making expensive mistakes when applying the rules on the CGT cost-base uplift on assets held in their SMSF is a large pitfall for SMSF’s as these decisions, once elected in the 2017 tax return are irrevocable and binding with the ATO.
Even where the pre-conditions have been satisfied, many SMSF’s advisers aren’t adopting a comprehensive approach to determining which assets should have the relief applied. That is, they’re simply adopting a view that assets with unrealised capital gains such as residential property will have their cost-base uplifted and those with unrealised capital losses won’t, potentially resulting in people missing out on locking in tax-free capital gains indefinately, or moreover, triggering unnecessary present or future tax bills.
Being a one-off binding decision with the ATO, up-lift decisions can have significant financial consequences to a family’s SMSF, such as creating immediate or longer-term tax burdens or over the longer term such as effecting death benefits received by their beneficiaries.
An appropriate approach to the Transitional CGT relief for SMSF Trustee advisers to take is to complete a comprehensive assessment of every asset held by the SMSF and the personal circumstances of the members and their family and address possible timing mismatches, between asset disposals and the need for members to begin drawing pensions.