Natalie Scott, superannuation adviser for the Knowledge Shop, said in a recent webinar that trustees have to decide what assets they may wish to retain or whether they could pay them out as a lump sum, in-specie transfer, rollover, or sell them outright.
“If they’re unlisted or listed trusts, then obviously the options are limited as there is a smaller market available, so you might need to look at possibly selling them to a related party,” she said.
“An SMSF can sell an asset to a related party as long as it’s at market value. The rules on acquisitions for SMSF only apply when the SMSF is purchasing the asset from a related party. They don’t apply to the sale of SMSF assets to a related party.”
However, she said it’s important to keep in mind section 109 of the Superannuation Industry (Supervision) Act which deals with arm’s length rules to make sure that the requirements are met in that circumstance.
Scott used an example of a couple, James and Madeline, who are winding up their SMSF, in which assets include a residential premises, 1.2 listed shares units in an unlisted unit trust, cash at a bank, a term deposit, and a painting that is a collectible.
James has a slightly higher superannuation balance than Madeline with $3.5 million compared to $2,050,000.
“In this case, we can transfer the units in an unlisted unit trust and painting as an in-species lump sum if the trust deed allows and an independent valuation is obtained for the painting,” she said.
“In terms of what you can do for the asset of the residential premises, you could look at selling that property to liquidate it and the same with the listed shares. Obviously, residential property will take a little bit longer, but the listed security should be done fairly quickly.”
In terms of the units in the unlisted unit trust, Scott said it would be best to transfer that out as an in-specie lump sum. The cash and term deposits are pretty easy to deal with. In this case, if the trust deed allows a death benefit lump sum, then it should be possible, she said.
Scott added that even though a fund may be treating things as an in-specie lump sum, it is important to remember that it still needs to ensure the transactions are at market value.
“We must do the transfer or the units on the market value on the date of transfer, but we don’t need a valuation to back up that value,” she said.
