How are SMSFs affected by capital gains tax?

Published 10 May 2019

Capital gains tax, or CGT, can be a confusing factor in your retirement planning, especially where self managed super funds (SMSFs) are concerned. Here, we break down the rules around capital gains tax rules for self managed supers.

What is capital gains tax?

When you sell a capital asset, such as a house, you either make a gain or a loss, depending on how the market is fairing. Therefore, capital gains are profits made on these assets, and under Australian law, they can be taxed. If you make a capital gain, it’s assessed as part of your income, and depending on your earnings may increase the amount of tax you’ll need to pay.

How are SMSFs affected by capital gains tax?

A self managed super is a fund where the members are also the trustees and are responsible for ensuring they are operating within proper tax laws. Within self managed supers, superannuation assets are considered to be in either the accumulation stage, where contributions are being made and locked away for the future or the retirement phase, where pension starts.

During the accumulation stage, assets that are sold are liable for CGT if a profit is made on them. However, those sold during the retirement stage are exempt from this taxation. Due to this exemption, many SMSF members hold off from selling capital assets until they’ve retired.

When including assessable income in a self managed super fund, it’s vital to note any capital gains will be taxed at the SMSF flat rate of 15 per cent. For SMSFs that follow the correct tax protocols and have owned the asset for over a year, there is a CGT discount they can claim.

Those in self managed superannuation funds need to have a thorough understanding of Australian tax laws and investments not only to get the best returns but to ensure that the fund is operating within legal requirements. It’s illegal for a self managed super to exist for personal spending prior to retirement. If you’re looking at accessing funds in your self managed super, get in touch with your lawyer first to ensure that you’re within your legal rights.

If you’re part of a self managed superannuation fund, and believe that you have been unfairly taxed or omitted from contributions, it’s vital to get in touch with the experts at Gerard Malouf & Partners Superannuation Disputes Lawyers to help with your claim with our No Win No Fee policy.

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