Peter Oliver and Damian Ryan highlight some important issues for unsegregated superannuation funds.
With new superannuation changes commencing on 1 July 2017, much attention has focused on member impacts from the $1.6M cap on pension phase assets. However, as superannuation funds prepare for the changes, a number of practical issues have emerged which require close attention from a fund perspective.
Superannuation funds that are unsegregated for tax purposes face particular issues in relation to the transitional capital gains tax (CGT) relief where members transfer part of their balance to an accumulation account prior to 1 July 2017. Broadly, the transitional relief allows an unsegregated fund to choose that a CGT asset is treated as being sold at market value immediately before 1 July 2017 and reacquired just after that time.
The fund can also choose that the non-exempt proportion of any capital gain is deferred until the future disposal of the asset. If an unsegregated fund does not choose the CGT relief, the compulsory exclusion of assets supporting transition to retirement income streams will result in lower exempt current pension income (ECPI) and a larger assessable capital gain on the future disposal of any fund asset (as the future ECPI proportion applying to the capital gain will be lower).
In considering the CGT relief choice, funds should consider:
Finally, the relief as drafted appears to exclude Pooled Superannuation Trusts, a curious omission that appears to be an oversight.