What is one of the main Small Business CGT Concessions issues that challenge SMSF advisers the most now?
Some of the provisions for the Small Business CGT Concessions (in Division 152) were amended and passed by Parliament in September 2018. The amendments took effect from 8 February and changed the way in which some of the crucial tests for accessing the concessions operate. They ‘tightened’ the taxpayer’s access to the concession. These changes meant that, in most instances, access to the Small Business CGT Concessions may require some forward planning and careful analyses on how the relevant provisions apply to the client’s factual circumstances.
In addition, the changes to superannuation and tax laws from 1 July 2017 were regarded as the most significant changes to the superannuation industry since 2007. The changes also have the effect of further limiting how much members can contribute to their superannuation fund and restricting the extent of tax exemption which funds paying a pension can claim.
One of the ‘silver linings’ for the superannuation changes is that the Small Business CGT Concessions (if accessible) gives their clients the opportunity to contribute additional amounts to superannuation outside of the restrictive contribution cap rules.
Hence, the challenge is to ensure that the requirements to achieve this outcome are all met.
What is one of the common mistakes advisers usually make in this area?
The intersect between the superannuation rules and the tax rules is complex and may not necessarily be straight forward. Notwithstanding this, it is crucial that all the requirements needed to achieve the outcome of qualifying for the relevant Small Business CGT Concessions are satisfied.
A common mistake is to assume that the requirements needed to be satisfied remain the same after the legislative changes in 2017 and 2018. Depending on the circumstances, this may not be the case, and it may be very costly for the client if the transaction is implemented based on erroneous assumptions.
What are some of the big trends and developments you see ahead in this area?
You will see that from the legislative changes, the big trends and developments in this area of law means that more careful analysis and planning will be required by advisers to ensure that the right strategy and planning is implemented for the client to:
- plan for their retirement using their SMSFs; and
- to access tax concessions such as the Small Business CGT concessions.
Your topic will be focusing on ‘Small Business CGT Concessions’. What do you see are some of the key takeaways and benefits for SMSF practitioners and their practice from attending your session?
The trick to succeed in this area is (put simply) as follows:
- plan ahead and strategise appropriately, taking into account the relevant legal tax and superannuation legislative provisions and ensuring that the client takes adequate legal advice on the transaction;
- ensure that the right legal documents are put in place to support the transaction; and
- ensure that the steps and requirement needed are implemented in the correct order.
Yikai Hoe is a superannuation and tax lawyer practicing in Perth, Western Australia. He is also the director of Provident Lawyers, a commercial law firm which focuses its practice on superannuation and tax law. Yikai has had over 10 years’ experience working in tax and state duties. Since 2010, he has worked with and assisted accountants and financial advisers on a myriad of legal issues for their SMSF clients. He enjoys navigating through the complexities in this area of law and is passionate about sharing my knowledge with others. Contact Yikai at email@example.com.