Risks flagged with delay of notional capital gains

SMSF trustees planning to take advantage of the CGT relief as part of the new super reforms have been warned there are risks associated with delaying the realisation of notional capital gains till future years.

Speaking to SMSF Adviser, SuperConcepts executive manager of SMSF technical and private wealth Graeme Colley said for many SMSF trustees there are benefits with taking advantage of the CGT relief and resetting the cost base.

“This year it may be the last year where perhaps they’ve got such a high proportion in pension phase and there [may] be less tax payable on it going forward if they bring the capital gain to account in say two, three or four years’ time, [as the percentage of tax free assets may not be as high],” he explained.

“[However], there’s a certain risk associated with saying ‘well we’ll leave that for a couple of years before we actually do realise that.’ In some cases, they don’t see the underlying tax consequences of what they’re doing,” said Mr Colley.

SMSF trustees need to think about this when deciding whether to include the notional capital gain as accessible income this year, or going forward, he said.

“It’s a pretty important thing because there’s a risk associated with holding off on including that in future years.”

Mr Colley said it is important SMSF practitioners talk to their clients about this to make sure they understand the tax risk that’s associated with delaying the transaction for a few years’ time.

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