Clients and website enquirers sometimes ask what is in-specie transfer to SMSF and how does it work?
Simply, it is transferring a non-cash asset into your Self-Managed Super Fund (SMSF). But there are caps on the total value that can be transferred. For Tax Year 15-16 the Concessional Cap is $30,000, (or $35,000 for over 50 years old). From 1 July 2014 the Non-Concessional cap is $180,000. SEE the ATO site.
Along with contributing by rolling over from another super fund, employer contributing the mandatory Super Guarantee (SG) (concessional contribution – meaning the employer business gets a tax concession/deduction), salary sacrifice, or your own after tax savings (non-concessional) it is possible for members to also make contributions by transferring ownership of assets directly into the SMSF instead of cash and these types of contributions are called “in specie” contributions. Importantly only certain assets listed in the Super Laws can be transferred in specie by a member, otherwise it is illegal to transfer an asset owned by a member into the SMSF.
Assets allowed to be transferred to a SMSF and owned by a member (or an associate of an SMSF Member by blood or marriage or entity controlled by a Member) include:
- ASX Listed Securities
- Widely Held Managed Funds
- Business or Commercial Property (not Residential)*
- Cash Based investments such as Bonds and Debentures.
*NOTE – whilst a SMSF CAN purchase Residential Property from a person who is NOT an member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member), a SMSF CANNOT purchase Residential Property from a person who IS 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 – this is illegal! It is not clear why commercial is allowed but residential is not.
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 – ask your stock broker or call us for referral. You will name the Purchaser of the Shares as your SMSF. At year-end as part of compliance, you can specify WHICH member account the shares will be owned by.
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, complete an Off Market Transfer Form and lodge it with the Fund Manager directly where you list the Purchaser of the Managed Funds as your SMSF. At year-end as part of compliance, you can specify WHICH member account the Funds will be owned by.
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 which includes lodging the transfer documents with the relevant State Revenue Office. You list the Purchaser of the Commercial Property as the TRUSTEE of your SMSF. At year-end as part of compliance, you can specify WHICH member account the property will be owned by.
Residential Property transfer form members is illegal
Remember that it is illegal 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). Never contemplate this transfer as significant penalties and non-compliance apply.
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 Transfer Documentation Forms. For Commercial Property it is wise to have an independent valuer involved to satisfy the auditor at year end.
Allocation within the SMSF
Making an In Specie Transfer to a SMSF, means it can be treated in one of two ways when it is received – either a Contribution to a member or as an Asset Purchase by the SMSF and its value shared amongst all members. To explain more –
Treating as a Contribution
The asset transfer you will list the purchaser of the asset as the SMSF Trustee. At the end of the financial year you elect which member account will be allocated the contribution and the type of the contribution to be allocated – Non Concessional (most common) or Concessional (usually where an enterprise sells the asset as an example). Once the election is made, the value of the asset (not the asset itself). Remember to keep in mind the Contribution Limits as mentioned earlier.
Treating as an Asset Purchase allocated to all members
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 the value of the asset (not the asset itself) will be allocated on a proportional basis to each member account (asset pool) based on that Member’s existing proportion of the SMSF at the time of the transfer.
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