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Contributions - In Specie Transfers


 
 
Transfer of an Asset from a Member to the SMSF

Members of an SMSF can make contributions in cash. It is also possible for Members to make contributions of assets directly into the SMSF instead of cash.  These types of contributions are called "in specie" contributions.  Only certain assets listed in the Super Laws can be transferred in specie by a Member.  If the asset is not specifically listed in the Super Laws, it may not comply with super regulations to transfer an asset owned by a Member into the SMSF.

 
 
Assets that can be transferred In Specie

The only assets currently allowed to be transferred to an SMSF from a Member (or an associate of an SMSF Member by blood or marriage or entity controlled by a Member) are as follows

  • ASX Listed Securities
  • Widely Held Managed Funds
  • Business or Commercial Property
  • Cash Based investments such as Bonds and Debentures.

Whilst an SMSF can purchase Residential Property from a person who is not a Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member), an SMSF cannot purchase Residential Property from a Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member) even if the purchase is at market value.

 
 
Transferring ASX Listed Securities

To transfer ASX Listed Securities from your personal name to the name of the SMSF an Off Market Transfer Form must be completed and lodged.  In the Off Market Transfer you will need to list the Purchaser of the Shares as your SMSF.  You will not need to specifically state which Member the shares are being allocated to.  This is done as part of the annual Checklist Process detailed below.  The process to complete an Off Market Transfer is discussed in detail here.

 
 
Transferring Widely Held Managed Funds

To transfer Widely Held Managed Funds (e.g. MLC, AMP, Platinum etc.) from your personal name to the name of the SMSF, an Off Market Transfer Form must be completed and lodged with the Fund Manager directly.  A generic Off Market Transfer Form can be found here.  In the Off Market Transfer you will need to list the Purchaser of the Managed Funds as your SMSF.  You will not need to specifically state which Member they are being allocated to.  This is done as part of the annual Checklist Process detailed below.

 
 
Transferring Commercial Property

To transfer Commercial Property from your personal name to the name of the SMSF, you will need to execute a Contract of Sale and will need a solicitor to prepare the required documentation including lodging the transfer documents with the relevant State Revenue Office.  You will need to list the Purchaser of the Commercial Property as your SMSF.  You will not need to specifically state which Member the Commercial Property is being allocated to.  This is done as part of the annual Checklist Process detailed below.

 
 
Transferring Residential Property

You must remember that it does not comply with super regulations to transfer Residential Property from a Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member).  So you should never contemplate this transfer as it will lead to significant penalties.

 
 
Transfers must be at Market Value

All In Specie Transfers of assets from a Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member) must be transferred at Market Value.  The Market Value must be clearly detailed in the Off Market Transfer Form prepared for the transfer of ASX Listed Securities or Managed Funds or in the event of Commercial Property in the Transfer Documentation.  To the extent that the asset is transferred to the SMSF at a value under Market Value the transfer will be "deemed" to be at Market Value.

 
 
Treatment of In Specie Transfers within the SMSF

When you make an In Specie Transfer to an SMSF, it can be treated in one of two ways when it is received by the SMSF. It can be treated as either a Contribution or alternatively as an Asset Purchase by the SMSF. It is totally your choice which option is chosen!  Each is discussed below.

Treating In Specie Transfer as a Contribution

As detailed above in the documentation to effect the asset transfer you will need to list the purchaser of the asset as your SMSF. At the end of the Financial Year we will forward to you a Checklist detailing if you wish the transfer to be treated as a contribution or an asset sale. If you elect the transfer to be treated as a contribution you will need to elect which Member will be allocated the contribution and the type of the contribution to be allocated, namely Non Concessional or Concessional. Once the election is made, the value of the asset (not the asset itself) will be allocated to the Member when preparing the annual compliance documents for the SMSF. The Eligibility Criteria and Contribution Limits will need to be carefully borne in mind under this option.

Treating In Specie Transfer as an Asset Sale

As detailed above in the documentation to effect the asset transfer you will need to list the purchaser of the asset as your SMSF.  At the time of the transfer you can elect that the transfer be treated as a sale and the SMSF pay you the Market Value of the asset being transferred.  In this case we will not record the asset transfer as a contribution. Under this scenario the value of the asset (not the asset itself) will be allocated on a proportional basis to each Member based on that Member's existing ownership of the SMSF at the time of the transfer, when preparing the annual compliance documents for the SMSF.

ESUPERFUND does not provide financial advice. You should obtain your own independent financial and taxation advice about whether this course of action is appropriate for your circumstances.

 
 
Potential Issue 1:  Assets Preserved until Retirement

Whilst there can be tax savings by transferring assets from your personal name to your SMSF, there are several catches which must be carefully considered.  The first is that transferring assets to your SMSF "traps" the assets in the SMSF until you are at your preservation age.  So whilst it may be tax advantageous to transfer assets to your SMSF you must ensure that it is money you will not require until at your preservation age.

 
 
Preservation Age

Generally, you must reach preservation age before you can access your super. Use the following table to work out your preservation age.

Date of birth Preservation Age
Before 1 July 1960 55
1 July 1960 – 30 June 1961 56
1 July 1961 – 30 June 1962 57
1 July 1962 – 30 June 1963 58
1 July 1963 – 30 June 1964 59
From 01 July 1964 60

 
 
Potential Issue 2:  Stamp Duty

Stamp Duty may be payable on Managed Funds and Commercial Property Transfers and should be carefully considered prior to transferring these assets to your SMSF. Accordingly you will need to contact the State Revenue Office or your solicitor to discuss the Stamp Duty implications associated with any transfer where it involves Managed Funds or Commercial Property. There is no stamp duty on share transfers.

 
 
Potential Issue 3:  Capital Gains Tax

Because there is a change in ownership of the asset transferred (from you to the SMSF), the asset transferred is deemed to have been sold resulting in possible CGT implications on the transfer namely:

If the asset has been held for less than 12 months, any capital gain on the asset transferred will be realized and the full amount of the capital gain will be included in your personal taxable income.

If the asset has been held for more than 12 months, any capital gain on the asset transferred will be realized and 50% of the capital gain will be included in your personal taxable income.

Any capital loss on the asset transferred will be realized and will be included in your personal taxable income.

This means that to the extent there is a capital gain on the transfer of assets into your SMSF the capital gains tax cost needs to be considered. In some cases shares will have been held for many years and the capital gains will be significant. However this does not automatically mean that you should avoid this for fear of paying some tax now.


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