Super Accumulation Phase CGT

Discussion in 'Superannuation, SMSF & Personal Insurance' started by JasonC, 23rd Feb, 2020.

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  1. JasonC

    JasonC Well-Known Member

    Joined:
    14th Mar, 2017
    Posts:
    227
    Location:
    Sydney
    My super is in accumulation phase (18 years away from being able to access it) and inside it I have a portion invested in CFS Australian Geared Share Fund (part of CFS Wholesale Super).

    Due to it's stellar recent performance (as well as the stock market in general) it has made quite a large capital gain. This fund is particularly volatile (as it is internally geared) hence I'm considering rebalancing some of the funds into something less aggressive at this point.

    According to sharesight I have a $150k (longterm) capital gain on the fund (using FIFO method). My understanding is that there is a 33% capital gains discount if held for more than 12 months, and then 15% tax is applied - so effectively 10% on anything held for more than 12 months.

    So if I transferred from the CFS Geared Share fund to another fund within CFS Wholesale super, I'm thinking there would be a $15k CGT tax bill. Given this is in a super fund, how does this work? Is the tax automatically taken from the fund when I request the transfer?

    Does the CGT have to be calculated using the FIFO method? I could see situations where doing LIFO might be better off (if you are planning on leaving the rest of the fund units until pension phase).

    Thanks,

    Jason
     
  2. JasonC

    JasonC Well-Known Member

    Joined:
    14th Mar, 2017
    Posts:
    227
    Location:
    Sydney
    Found this on the CFS website - which seems to suggest capital gains tax is somehow magically included in the unit prices.

    ACCUMULATION AND PRE-RETIREMENT PENSION

    “A net capital gain realised upon the sale of assets is also included in the fund’s assessable income for tax purposes. For assets held for more than 12 months, only 2/3 of the net capital gain is assessable. Tax costs due to realised capital gains are reflected in the unit price of your investment option.

    A provision is also made for future estimated tax liabilities associated with unrealised capital gains and losses on assets held by the fund and is also reflected in the unit price of your investment option. When withdrawing from an investment option or switching, capital gains tax is not separately deducted from your account. This is because an estimate of future tax on unrealised capital gains has already been factored in.”
     
  3. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

    Joined:
    18th Jun, 2015
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    15,124
    Location:
    Sydney
    FIFO is not mandated and is a matter for the trustee and not the member to consider. LIFO is not an acceptable choice by a trustee. For example if the fund has two hypothetical members and the other produces a CGT loss that may pass to them and you get the CGT profit yet the fund may offset the two and nil tax is payable. Another hypothetical issue is one members buys an investment and the others sells. While there may not even be a CGT event for the fund the member accounting would recognise the effect on both members through unit pricing as if there was a cgt event.

    Note also the spread on buy / sell. This is the house fee to cover transactions and admin. The spread is often 3%- 7%

    The FUND will determine its own tax position and this will trickle through to your account directly (smsf) or indirectly.
    Unitised investments have a catch most people dont know about. Most funds will only effect a change of unitholding on a specific day of the week (Wednesday is common). This is to enable a full revalution of actual positions and realised incom etc once each week for fairness otherwise one member could sell prior to a correction and another does not. This unitprice is an average and can produce anomolies vs a direct investment such as a smsf. eg The member who actually sells down prior to the correction would not benefit.

    Generally speaking when a investment switch occurs the fund will reverse the market value of the units in the specific investmnet based on the market value on the date disposed (at the sell price recalculated) and compare this to the original cost of those units when acquired by that member account. If there is a profit the fund may apply 15% tax OR 10% or 0% tax depnding on the duration of the time held. The resulting accounting will (eventually ?...Depends on the fund accounting it may he invisible and be done later ) credit income with the profit determined and also debit tax on earnings. Many funds accumulate this and make a semi annual or quarterly allocation which is also adjusted at year end so that income and tax allocations are "the proportion of the return to the fund on investments over that period that is attributable to those benefits" as required by SIS Reg Div 5.1

    Super software systems are some of the most complex and are validated and approved by APRA for use.

    ( I used to audit large funds)