Can SMSFs and SMAs indefinitely postpone CGT?

compliance/superannuation/tax/AIST/

19 June 2015
| By Mike |
image
image
expand image

A key industry funds organisation has told the Government that Self-Managed Superannuation Funds (SMSFs), wraps and separately managed accounts (SMAs) are being used to potentially indefinitely postpone the payment of Capital Gains Tax (CGT).

The Australian Institute of Superannuation Trustees (AIST) has used a submission responding to the Tax White Paper discussion process to point to the strategy and has argued that leverage is therefore not appropriate for superannuation.

Dealing with the question of CGT and negative gearing, the AIST submission said it had been argued by many that the CGT discount discouraged short-termism and cited academic argument that "any tax on capital gains provides the added difficulty that the taxation of assets can potentially be postponed indefinitely".

"… indeed a widely promoted strategy in SMSFs and some APRA-regulated funds (notably superwraps and super-SMAs) is to migrate long held assets between divisions of a superannuation fund. This in turn, means that CGT liabilities may never arise," the AIST submission said.

"We note the problem that the growing presence of investment gearing in superannuation funds has led to the exacerbation of this issue, as more and more funds are diverted into large bulky and illiquid assets, which are unable to be disposed of quickly," it said.

The AIST submission said that it had already pointed out the risks associated with leverage to the Financial System Inquiry (FSI).

"In particular, we pointed to the fact that a relatively unlevered superannuation sector greatly cushioned the impact of the global financial crisis," it said.

"We stand by our assessment of this and point to effective CGT collection as a way to reduce this risk. Furthermore, we reiterate our recommendation that leverage is not appropriate for superannuation, which is designed to be a retirement savings regime, not a borrowings regime."

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

2 months 3 weeks ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months 3 weeks ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 months 4 weeks ago

ASIC has suspended the Australian Financial Services Licence of a Melbourne-based financial advice firm....

1 week 4 days ago

The corporate regulator has issued infringement notices to three AFSLs whose financial advisers provided personal advice to a retail client while unregistered....

2 weeks 3 days ago

ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test....

3 weeks 1 day ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND