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  1. Tina Pham

     /  March 8, 2018

    Hi Liam

    Thank you very much for this article.

    We have a SMSF having TTRs for both members during 2017FY and using the proportionate method. The SMSF financial adviser has advised to commute their entire TTRs back to accumulation phase on 30/06/2017. Can you please advise in this case will the Super Fund be eligible for CGT relief on 30/06/2017? Does it need to keep at least one TTR through the period from 11/09/2016 to 30/06/2017?

    Thanks Liam

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    • Hi Tina, that is too specific a question to be dealt with here. You should ask the funds actuary and accountant/administrator for specific tax advice which may involve a private ruling from the ATO.

      Here are some general pointers but do not rely on this without getting specific advice on your circumstances as too many factors can change the scenario and advice.

      LCR 2016/8 explains that even where a TTR pension was commuted and rolled back to accumulation on 30 June 2017, CGT relief may still apply. If both of the members were 100% in TTR than the fund would have been segregated by default at the pre commencement period.

      21. CGT relief is available for such an asset provided:

      · the CGT asset was a segregated current pension asset at the start of the pre commencement period
      · the CGT asset stopped being a segregated current pension asset of the fund at either:
      (i) a time during the pre-commencement period, or
      (ii) the start of 1 July 2017 because the asset was supporting a TRIS (either of these times is a ‘cessation time’)
      · the fund held the asset throughout the pre commencement period (disregarding the deemed sale and repurchase of the asset by the fund because CGT relief applies)
      ·the fund is a complying superannuation fund from the start of the pre commencement period until the cessation time, and
      ·the trustee chooses for CGT relief to apply to the asset (in the manner discussed in paragraphs 13 to 16 of this Ruling).

      21A. Examples of circumstances in which an asset may cease being a segregated current pension asset during the pre-commencement period include where:

      · a member transfers value back to the accumulation phase and the fund re-characterises an asset in that period as a segregated non-current asset to support the value transfer
      · an individual discontinues their TRIS and transfers some or all of its value back to the accumulation phase during the pre-commencement period (an asset supporting that value transfer would cease being a segregated current pension asset), or
      · a fund starts using the proportionate method during the pre-commencement period.

      If the fund had the TTR pensions and some money in accumulation and was unsegregated, and they roll the TTR pensions back prior to 1 July 2017, the CGT relief may still apply if all the other conditions are met and the fund continued to be unsegregated at that point.

      Complying superannuation fund continues using the proportionate method in the pre-commencement period, or pooled superannuation trust

      81. A complying superannuation fund that continues using the proportionate method throughout the pre commencement period, or a pooled superannuation trust has three options available when choosing to apply CGT relief. To qualify, the trustee must satisfy the conditions in paragraphs 38 or 41G of this Ruling, as applicable.

      38. If a complying superannuation fund is using, and continues to use, the proportionate method throughout the pre-commencement period, it may choose CGT relief for a CGT asset provided:[32]

      · the fund is a complying superannuation fund throughout the pre-commencement period, and held the asset throughout that period
      · for the 2016-17 income year, the average value of the fund’s current pension liabilities divided by the average value of its superannuation liabilities exceeds zero (that is, the proportion in subsection 295-390(3) of the ITAA 1997 exceeds zero)
      · throughout the pre-commencement period, the asset was not a segregated current pension asset or a segregated non-current asset, and
      · the trustee chooses for CGT relief to apply to the asset (in the manner discussed in paragraphs 13 to 16 of this Ruling).

      39. A trustee may choose to apply CGT relief to any, or all, of their fund’s CGT assets that meet the conditions in paragraph 38 of this Ruling.

      However, It has been pointed out to me that there was an article in the media in which it suggests that for CGT relief to apply to a fund with a TTR, the TTR needs to be in place as at 1 July 2017. So if the accountant has any doubt they could obtain a private ruling. Please Read

      https://www.smsfadviser.com/news/15634-smsf-warned-on-last-minute-cgt-relief-traps?utm_source=SMSFAdviser&utm_campaign=29_06_17&utm_medium=email&utm_content=1

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  2. Peter hawketts

     /  April 14, 2017

    If a beneficiary reaches their preservation age in the 2016/17 year and starts a TTR before 30 June using segregated assets method and the fund holds a residential property that has increased in real value by $300K and the fund transfers this asset to the TTR pension assets and then sells the property (IE enters into a contract) at arms length before 30 June will this avoid the capital gain that would apply if they sold post 30 June 2017?

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    • Hi Peter the answer is it depends! Talk to your accountant and auditor about how they record the capital gain if the fund has only been in pension phase for part of the year. They may need to refer to an actuary. Some treat all the capital gain as occurring in the pension phase while others argue that the gain is averaged over the financial year. The ATO may see your move as a tax avoidance measure so make sure you have good documentation in place. I am working on a similar case so flick me an email to liam@verante.com.au and I will let you know the answer I get.

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  1. Using CGT Relief for your Transition to Retirement Pension – Matters of Money

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