Many people are approaching retirement with significant assets outside of super and little within super, even though many of us have been encouraged to maximise the amount of assets held inside of superannuation. These assets can often include a sizeable share portfolio or property portfolio owned personally. Often times these assets have been kept outside for very good reasons such as family related matters or inheritance or because the family business needs the money first.
If someone decides that they want to move these assets into their super fund, what are the strategies they use and what are the issues?
Some people use these strategies to top-up their super:
- transfer the assets to their super fund off-market, making sure they don’t over-contribute beyond their contribution limit.
- sell the assets, contribute the money to super and buy other investments within the SMSF.
- transfer a part ownership of the assets to the super fund, keeping some in and some out of super, just in case.
But before implementing a strategy they need to consider a variety of issues.
For example, they review whether the type of asset to be transferred can be transferred in the first place. Is it allowable? Can the super fund purchase it from a related party? Does an ATO rule prevent the transfer? Residential property is one area where it is very hard to put your investment into your super fund. Soon transfers of most public shares will be disallowed too.
Also consideration is usually given to the costs of transfer, such as potential stamp duty as well as capital gains taxes payable by the seller. Are the costs worth it? For some assets you will even need to get a formal valuation prepared. Property is one area where a director valuation was often relied upon, but not anymore.
The new contribution limits can be a stumbling block on your way to reaching your goal. Take a simple commercial property valued at $1,000,000. Even if this was owned by several members of a family, transferring it can often breach the contributions limits. Perhaps a borrowing could be used to reduce any breach? With shares, the contribution limits can be more easily dealt with. For example, people can try to stagger the transfer of shares over many years. Or transfer shares that have a capital loss first, so that capital gains tax payments are not triggered immediately.
As you can see it is a bit more complicated than just filling in a trasnfer form. Proper planning can be very usefull and that’s we we can help. There are a few strategies people can implement to transfer large assets or figure out how best to move other assets into a SMSF without unintended consequences.
Please contact us to discuss your situation.