Masterclass SMSF – In-specie Transfers – traps to avoid in Self-Managed Super

In-specie Transfers – Traps to Avoid in Self-Managed Super

In-specie Transfers – Traps to Avoid in Self-Managed Super

In-specie refers to non-cash and there are certain restrictions when transferring assets that are non-cash into Self-Managed Super Funds (SMSFs). Generally a super fund cannot acquire assets from related parties, whether purchased or contributed in-specie. This includes residential or investment property, life insurance policies, units in widely-held trusts, bank notes, coins and collectables. But the exceptions are business property and listed securities (shares).

Example – Bob is a member of his SMSF and wants to transfer his factory worth $600,000 to his SMSF. As there is a $150,000 limit on personal (concessional) contributions, (which he can use the Brought-Forward rule of 3 years, a total of $450,000) there is still another $150,000 over the contribution limit (cap). He would need to consider other options such as splitting the contribution with his wife, or having the fund purchase the factory out-right, or with a limited-recourse borrowing arrangement if there are not enough funds, or transferring part of the ownership and continuing to own the remainder as tenants – in-common. Recent legislation has proposed a ban on off-market/in-specie transfers, but this is deferred to 1 July 2013, yet to become legislation. The reason behind this is to stop transfers below market value. The difference in value will be deemed a contribution. It is advised to seek advice to ensure breach of caps and regulations are avoided.

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