Keeghan Silcock, senior associate with Cooper Grace Ward Lawyers, said an example of a contribution that cannot be made as an in-specie contribution is if the fund is making a contribution under the capital gains tax lifetime cap.
“What you’re wanting to use is the transfer of assets that’s triggered that CGT liability as the in-specie contribution, but unfortunately that’s not possible,” Silcock said.
“There are a whole host of issues that you need to consider when making an in-specie contribution of assets. You need to check the SMSF trust deed to make sure that this is permitted. You also need to check the investment strategy for the SMSF to make sure that it contemplates the acquisition of that asset.”
Silcock said making an in-specie contribution to an SMSF can depend on many factors.
“An in-specie contribution is effectively the transfer of assets to your self-managed super fund to satisfy that contribution, rather than a transfer of cash.”
“The first thing you need to consider is whether the asset is something that can be acquired by the SMSF without breaching section 66 of the SIS Act. For example, business real property or listed shares or units in a widely held trust. You need to be comfortable also that the contribution won’t breach the contribution rules.”
If a fund is transferring business real property, it would be important that the trustee has an independent valuation to confirm the market value of that asset.
“Where the asset is being transferred from a related party to the SMSF rather than the member, to ensure that that’s still properly treated as a contribution, you’ll need to prepare some documents to reflect that structure,” Silcock said.
“Another very important consideration is determining what the tax and duty implications are of that asset transfer for the party making the transfer for CGT purposes, and also for the SMSF in terms of whatever duty liability that transfer might trigger.”
She added that in Queensland, there is no duty exemption available for a transfer of assets into an SMSF. However, where there is a transfer from a trust to an SMSF, trust cloning might be an option.
“If you’re in another state or territory then there may be a duty exemption available.”
“However, it is recommended that trustees seek advice at the time and properly document that contribution.”
