SMSF related-party off-market share and property transfers

Up until now members of super funds could try to transfer their personal shares off-market to their super fund. The big advantages were:

  • reduction in brokerage costs
  • ability to move personal investments to a preferred entity, like a SMSF, over time
  • sometimes people could claim a tax deduction for the contribution
  • some clever people tried to choose convenient dates to manage their tax bills

From 01/07/13 transferring investments that have an active market cannot occur off-market. So if you want to move your personal shares from your name to the super fund, you will have to first sell the shares on-market, pocket the cash, and then contribute that to the super so it can buy those same shares again. Simple off-market transfers of shares will probably not be possible anymore.

For those wishing to transfer property, you will now need a full and expensive valuation prepared from a registered valuer. Add that to the normal stamp duty payable and you’ve got one expensive proposition right there.

What the ATO are thinking is this. They saw people transferring assets at values which sometimes, according to their logic, suited the tax position of the person. So if they transferred a property, the director’s valuation was sometimes a little lower and luckily reduced the capital gains tax payable by the seller. They are trying to stamp this out with one fell swoop.

There are lots of other rules around super and asset transfers which I won’t go into but hopefully you can be wary of these new rules for the future. The ATO and the government are targeting any possible changes that could bring about easy tax revenue and enforce the spirit of the law. I would not be surprised if there were other super tax changes on the way very soon.

If you would like assistance with your tax issues please contact us.

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