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Capital Gains Tax Mistake

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Australians often have a mistaken belief that Capital Gains Tax relief may come at a price because of a misconception about the timing of these tax events and funds which were segregated before 30 June. Funds that paid an account-based pension above $1.6m had to commute any excess into accumulation before 30 June.

Some mistakenly thought that since there was a day in accumulation, the deemed capital gain on triggering the CGT relief under the segregated method won’t be fully tax exempt. However, the capital gain tax event is triggered only before the cessation time so segregated assets will have the gain effectively tax free when the relief is triggered.

An example where several SMSF practitioners have been worried is a scenario when there was $400,000 in accumulation on 30 June. The capital gain which was triggered is believed to be partially taxable because it is based on the $400,000 and $1.6m in pension which is effectively 20%. This is incorrect.

For those who commuted before 30 June, the gain may have been triggered on 29 June when the fund was wholly segregated so the gain is completely exempt. People are concerned that the segregated relief will come with a disadvantage in the end but the benefit of segregated assets is that the gain will be disregarded completely.

For more information about taxes in Australia, contact a Specialist to discuss your particular circumstances.

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Chan & Naylor Group has national offices in Brisbane and Capalaba in Queensland, Melbourne and Moonee Ponds in Victoria, East Perth in Western Australia, and BankstownParramattaPymbleNorth Sydney, and Sydney in New South Wales where our specialists can help you from making a capital gains tax mistake as well as assist with any enquiry you may have about business or property tax.



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