ATO warned on CGT relief regime

The Australian Taxation Office (ATO) has been warned that its proposed capital gains tax (CGT) relief regime presents significant practical challenges for large, unsegregated superannuation funds.

What is more, the ATO has been told that the cost of complying with the transitional arrangements may be “disproportionate to achieving the intended purpose”.

The Association of Superannuation Funds of Australia (ASFA) has used a submission to the ATO to warn not only of the practice challenges entailed in the proposed new CGT regime flowing from last year’s Budget but of the costs.

The ASFA submission said that these practical challenges would mean that superannuation funds might not be able to utilise fully the relief as intended and may incur considerable expense and risk in developing and implementing an interim solution that complies with the legislation.

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“This potential loss of tax benefit and the significant, additional, cost involved in complying with the legislative method generally will be borne by the members of affected superannuation funds,” the submission said.

It went on to say that whilst the theory behind the transitional CGT relief was logical, the assessment undertaken by many large unsegregated superannuation funds and their custodians since the legislation was finalised (and even earlier when the exposure draft version was released for consultation) was “that there are significant practical challenges that may prevent them from accessing the relief”.

“The single biggest impediment is that at least some of the custodians of superannuation funds (on whom funds rely for their broader CGT reporting) have indicated that significant upgrades may be necessary to their tax reporting and underlying IT systems to accommodate the relief.