understanding and optimizing use of accumulated (pre-June 30, 2017) Capital Losses in a SMSF

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understanding and optimizing use of accumulated (pre-June 30, 2017) Capital Losses in a SMSF

[ Edited ]

The interest we have is in understanding and optimizing use of accumulated (pre-June 30, 2017) Capital Losses in the SMSF offsetting any future (post July 1, 2017) Capital Gains

The reason for this interest of SMSF Trustees is as follows:

1. SMSF Trustees anticipating future potentially substantial (Unrealized) Capital Gains and

2. Where assets likely to be sold for a CG less than 12 months after purchase (especially for speculative assets and in volatile markets where liquidity is king and for sector allocation re-balancing by Trustees)

3. in the event of the death of a major SMSF superannuate in Pension mode the beneficiaries and/or dependents need to understand the benefits of realizing (disposal of pension and assets) and utilizing the accumulated Capital Losses to offset CGT as permitted in law; and the surviving Trustees choices for flexibility in application of these accumulated losses in maintaining an ongoing SMSF


We appreciate that until June 30, 2017 the SMSF will be in tax exempt pension phase; and that we may selectively choose to reset the cost base (reset to their value on or before June 30th?)

Furthermore division into pension and accumulation segments should take place on or before June 30th (Trust Deed must allow and Minutes of Trustee Meeting should reflect this decision)

Rules prohibit transferring particular investment assets between pension and accumulation segments IE no segregation of assets


As I understand the legislation for Capital Gains Tax on profits for SMSF assets post July 1, 2017 it is as follows:

Pension account segment (maximum $1.6 million pension limit) and Accumulation account segments (for all in excess > $1.6 million) are UN-segregated for CGT purposes

Capital Gains calculated on unsegregated totals (losses and gains totaled) and reduced by the proportional percentage in pension segment (totally tax free) versus accumulation segment

and then treated for CGT as follows:

A. 15 % on total calculated CG for assets sold less than 12 months after purchase

B. 10% on total Capital Gains (in other words a 33.3% discount) for those assets
Were we fortunate enough to have substantial Capital Gains on assets FY 17-18 or later Financial Years - how do we calculate the offset of CGT tax using the accumulated Capital Losses?

(We presume the SMSF tax Accountant calculates this and the Auditor signs off on the accounts; but Trustees make decisions to buy, sell (realize) or simply hold individual assets)

More importantly; specifically; what happens to the accumulated Capital Losses in the event of the death of a Trustee who happens to hold the major amount in the SMSF?

We believe these issues may be common concern for those SMSFunds and Trustees that experienced the losses of GFC and volatilities of markets.

 

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