The relief ensures that, for certain assets that were supporting superannuation income streams in retirement phase before 1 July 2017, an SMSF trustee can still receive a tax exemption on capital gains accrued but not realised.
Applying CGT relief will reset the cost base of an asset to its market value. The market value would be determined under the Valuation guidelines for self-managed super funds on the date the relief applies and allow you to defer a capital gain that arises when resetting the cost base for assets where you use the proportionate method.
The CGT relief is not automatic. You need to apply for it and once you do, you cannot change your decision. If you are eligible for the relief and do choose to use it, you need to advise the ATO on or before the day you are required to lodge, by completing the CGT schedule to the 2016-2017 SMSF annual return.
The lodgement date for the 2016-2017 SMSF annual return has been extended to 30 June 2018 for all SMSFs. This means SMSFs trustees have until then to lodge a return with an election for CGT relief, or amend a previously-lodged return to include an election if you hadn't already made one.
SMSFS AND NON-ARM'S LENGTH INCOME FROM TRUSTS
The non-arm's length income rules can apply to investments, transactions and other arrangements undertaken by SMSFs when the terms of the relevant investment, transaction or arrangement is uncommercial in nature.
If you distribute any income from your discretionary trust to a SMSF beneficiary, it is:
- automatically deemed non-arm's length income of the SMSF (regardless of the nature of the dealings between the relevant parties); and
- taxable at the highest marginal rate.
Income received by a SMSF that is a fixed entitlement to trust income is also non-arm's length income if it is:
- income from a scheme where the parties were not dealing with each other at arm’s length; and
- more than the SMSF might have expected to derive if the parties were dealing with each other at arm’s length.