• income or loss from a currency exchange fluctuation;

• deposit with a bank, building society or other financial institution;

• a loan, whether secured or not; &

• some other contract under which an entity is liable to pay an amount.

Effectively this means, with effect from 10 May 2011, that funds can no longer claim losses from “share trading” on revenue account (also applies to units in unit trusts and land).

Also, particular to complying superannuation funds, is that they cannot have what is commonly referred to as a “pre CGT asset”. This term is used to refer to an asset acquired by a taxpayer prior to the introduction of the CGT rules on 19 September 1985. However, due to section 295-90 and the definition of “30 June 1988 asset”, the CGT provisions apply to all fund asset disposals made on or after 1 July 1988. For assets acquired prior to 1 July 1988 (the date from when superannuation funds became a tax paying entity), their costs base is the higher of their actual cost or their 30 June 1988 market value. This would mean that any appreciation in value from cost to their 30 June 1988 market value would not be subject to tax and that any depreciation in value, from the time of acquisition up to 30 June 1988, would not be lost.

Complying superannuation funds are able to apply a 1/3rd discount where the fund has held the asset for at least 12 months. For assets acquired prior to 20 September 1999, the fund can also use the “frozen indexed” method for calculating the capital gain on the sale of the asset. This method indexes the cost base of the asset up to 30 September 1999.

There is also CG rollover relief for complying superannuation funds, including where there is a transfer of assets from a ‘small superannuation fund’ (fund with less than 5 members) to another complying superannuation fund upon marriage breakdown or de factor relationship to satisfy a family law superannuation payment (Subdiv 126-D ITAA 1997). Effectively, the cost base of the asset in the original fund transfers to the receiving fund and there is no actual gain or loss calculated until the receiving fund disposes of that asset. It is important to have a good record of cost base to ensure that the platform used for administering the fund applies the correct CGT cost base when the receiving fund ultimately disposes of the asset (even where it is again by way of family law superannuation splitting payment) and that the transferring fund applies the CGT rollover relief to the assets disposed of by way of in-specie transfer. SuperMate has a Marriage Split payment wizard, which can be accessed by either the Transaction Entry screen or from the Member Menu>Process>Money out and incorporates CGT rollover relief flagging.

Capital gains & losses made from segregated pension assets

Section 118-320 ITAA 1997 states that:

“A capital gain or capital loss that a complying superannuation entity makes from a CGT event happening in relation to a segregated current pension asset is disregarded.”

Consequently, where a fund is utilising the segregated basis and disposes of an asset which was a segregated pension asset, any capital loss cannot be offset against a capital gain made from the disposal of an asset from the accumulation side of the fund. Further, where there were no other capital gains made by the fund, that is, a net capital loss (made from the segregated pension asset(s)), this cannot be carried forward to a later year of income.

Treatment of capital gains and losses – unsegregated basis

Where a fund is using the unsegregated basis to claim ECPI, it must first calculate the net capital gain from all assets prior to claiming a proportion as ECPI, utilising the percentage provided on the Actuary’s Tax Certificate. The calculation steps are as follows:

Step 1:  Calculate capital gain or loss for each asset disposed of during the income year;

Step 2:  Total up the capital gains;

Step 3:  Total up the capital losses from current year asset disposals and offset against total capital gains from step 2 (consider applying capital losses firstly against “other capital gains” (not subject to indexing or discounting); then indexed gains, before applying against discounted gains);

Step 4:  If there is a remaining capital gain, offset any brought forward capital losses from prior years (again, consider order of application of capital losses per previous step);

Step 5: 

Consequently, where there is a net capital loss, the entire amount is carried forward to the subsequent income year, with no application of the ECPI percentage. This ensures that the full amount of the capital loss is offset against capital gains (in the following income year) prior to the application of the CGT discount and the ECPI percentage. Further, capital losses are not reduced by net ECPI, as is the case with revenue losses.