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Removal of trading stock election for SMSF's

February 2012

The Government has released the Exposure Draft on the limitation of the trading stock election for listed shares, listed units and land owned by a complying superannuation fund. These changes were announced in the 2011 Federal Budget and will ensure that these types of assets will always be taxed under the CGT regime.

The primary aim of these changes is to prevent superannuation funds from claiming losses on revenue account for the disposal of shares.

Currently, the rules allow superannuation funds to treat shares as trading stock so that losses can be offset against other income even where the fund had applied the CGT provisions to gains made on the sale of shares in earlier years (eg, to apply the CGT discount).

As a result of the GFC and the current state of financial markets, trustees of SMSF's have sought to claim losses on revenue account against other income.

The Government is seeking to remove the ambiguity that exists in the existing law by forcing funds to apply the CGT rules to these types of assets. The unfortunate element of this is rather than the ATO applying and enforcing well established principles concerning shares and trading stock, they are simply looking to legislate out of an administrative burden.

 

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Last updated February 2012. This article is provided for information purposes only and should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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Disclaimer

This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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