Q. We run an SMSF. The Accumulation sector of the fund has accumulated capital losses. Are there any restrictions or limitations on carrying forward indefinitely those losses?

A. Assets in an accumulation account of a Superannuation fund are subject to tax on income or Capital Gains.  Capital losses in the accumulation fund can be carried forward indefinitely.  However if you were to move the accumulation fund to pension mode then income and Capital Gains of the fund become exempt from tax and accordingly you will lose the ability to carry forward any Capital losses.  A common strategy is to retain a small portion of your aggregate funds in accumulation mode and utilise these losses against future Capital gains.

When operating a SMSF with an Allocated Pension, the assets of the fund can be structured as either Segregated or Unsegregated assets.  Segregated assets as the name implies will have the assets backing the accumulation funds in one account and the assets backing the pension fund in the other account. Unsegregated assets are investments of the fund that make no distinction between Accumulation and Pension Accounts.

If you are operating the fund with Unsegregated assets then you will require an Actuarial Certificate that can apportion the assets, income, capital gains and losses between the pool of capital required to provide for Exempt Current Pension Income (Allocated Pension income) and the portion applicable to the accumulation component of the fund.  You are required to obtain an Actuarial Certificate prior to lodging you annual tax return for an unsegregated SMSF.

If you are not sure if your fund has segregated or unsegregated assets most likely they will be unsegregated as it is the default option.

You can change the treatment of assets in a fund however it is important to seek advice if you are considering which approach to take and be aware of the trustee obligations for reporting purposes.


Follow Andrew on Twitter @AndrewHeavenFP.  This article was originally published in The Australian.