Transferring property from an SMSF needs special circumstances
Transferring an asset such as property from an SMSF can generally only be paid to an individual member except under specific circumstances, according to a specialist legal practitioner.
The transfer of an asset compared to a cash payment is generally referred to as an “in-specie transfer”, said Steven Jell from Cooper Grace Ward.
“The value of the total assets within the fund decrease by the value of the asset being transferred, and the individual’s member balance similarly decreases by the value of the asset that they receive,” he explained.
In a recent podcast for CGW, Mr Jell said the transfer of an asset such as property, like any other superannuation entitlement, must first satisfy the condition of release, which “there are limitations on the circumstances in which an individual can access their superannuation entitlements”.
“But basically, a member payment is a payment to you because you are a member of a superannuation fund,” he said.
“Member payments can generally only be paid to an individual member, but there are some specific circumstances where, depending on the asset that is being transferred, members would like to have that asset transferred to a trust or another company for various reasons.”
“There are some strategies that can be implemented to achieve those particular outcomes.”
He said it’s possible for any asset that can be held in a superannuation fund to be transferred out of the fund by way of an in-specie transfer of a member payment.
“Now, depending on the entity that manages that asset, there may be some specific requirements of that relevant entity,” he said.
“For example, the share registry, the titles office, or another asset manager might have some particular paperwork that needs to be completed in order to complete the transfer of the asset.”
Before transferring an in-specie asset, there are a number of things [that] must first be considered, including the member’s circumstances as well as the asset that is being transferred.
“A good starting point is the trust deed for the fund,” Mr Jell said.
“Does it permit in-specie transfers of assets? Does it set out a specific process that must be followed in order to implement a strategy like this?
“The asset itself must also be transferred for market value. So, we need to make sure the member has enough member entitlements in the fund that we’re looking to pay out, equal to the value of the asset.”
If the member’s entitlements are less than the value of the asset being transferred, there may be circumstances in which a proportion of the asset can be transferred to the member and the remaining proportion of the asset be left in the fund.
“There will also be tax consequences to consider as the transfer of the asset will likely be treated as a tax event for CGT purposes,” Mr Jell said.
“If we’re dealing with real estate, we need to consider the transfer duty consequences as well because there may not be an exemption or concession for the duty that would otherwise be payable on the transfer of that asset, depending on the eventual recipient of the asset, there may also be some estate planning and asset protection issues to work through.”
