In Specie transfer in to an SMSF
I get enquiries from so many people now with holdings from an employee share scheme or listings such as IAG (the old NRMA) , CBA, Telstra and now Medibank Private who wish to simplify the shares held in their own personal names as they approach 65 so they don’t have to do a tax return for themselves in retirement. One option often considered is making an in specie transfer to your SMSF.
In specie is the process of transferring shares, business real property or managed funds without selling the underlying investment.
An in-specie contribution occurs when a member transfers ownership of an asset they own to the SMSF. In this case, the capital value of the fund has increased and the increase in value is considered a contribution for the member whose member balance has grown.
While most superannuation funds can accept in-specie contributions, it occurs far more commonly with SMSFs than with industry or retail superannuation funds.
An in-specie contribution is considered an acquisition from a related party and such acquisitions are generally prohibited, listed shares, managed funds and business real property are exceptions to the general prohibition for in-specie contributions.
The transfer of the asset will be deemed to be a disposal for the member and any gain realised by the member may be subject to CGT, though there may be some concessions, particularly where the property was used in their own business or that of an associate. If self-employed or able to claim a tax deduction for contributions then some of the transfer can be considered as a Concessional Contribution. you should run the strategy past your adviser before implementing it to work out the CGT and the best way to minimise it.
In addition, it is not necessary that the entire value of an asset transferred to an SMSF be considered a contribution and this is particularly beneficial where the value of the asset is greater than the contribution caps available to the contributors.
For example, if a commercial property, lets say a shop, valued at $1,200,000 was to be transferred to an SMSF by a husband and wife and its entire value was considered a contribution, it could result in an excess non-concessional contribution of $600,000. To avoid this outcome, we could treat 2 x $300,000 of the transfer as a contributions for the husband and wife using the full cap of the 3-year Bring Forward Rule and the remainder as a sale. The SMSF would have to transfer $600,000 of cash or other assets to effect the sale on that portion of the property.
For shares most SMSF investors have a CHESS sponsored account so you should ask your broker for their Standard Transfer Form for Off Market Transactions.
Here is the link for the CommSec version of the form
In Specie transfer out of the Fund
In addition, assets can also be transferred out of the fund as in-specie payments though importantly, only lump sum payments can be made in-specie. Pension payments have to be made in cash. The rules on acquisitions from related parties do not apply to these transactions as the SMSF is disposing of the asset, not acquiring it.
Some clients buy a coastal house or city apartment in their SMSF as an investment while they are working but with an eye to moving in to it when they retire. To do so they must take it out of the fund on retirement. Often they will use the funds from the sale of their home on retirement to buy the property from the fund but the option is there to take the property out as a lump sum in specie transfer if timing makes a purchase strategy unsuitable.
Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.
Liam Shorte B.Bus SSA™ AFP
Financial Planner & SMSF Specialist Advisor™
Tel: 02 98941844, Mobile: 0413 936 299
PO Box 6002 BHBC, Baulkham Hills NSW 2153
5/15 Terminus St. Castle Hill NSW 2154
Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572
This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
Image courtesy of David Castillo Dominici at FreeDigitalPhotos.net
Bill Coleman
/ February 11, 2021Can I vender finance my son to purchase industrial shed held in my SMSF?
LikeLike
SMSF Coach - Liam Shorte
/ February 11, 2021Hi Bill I suggest you see a SMSF Specialist in your area to discuss your options. In general you cannot lend from your SMSF to a related party so the SMSF cannot vendor finance a sale to a member, relative or related entity. If you have equity in other non-super assets you might get advice on doing a private loan from you to your son to buy the property from the fund. Complex strategies so please seek personal specific advice. Liam
LikeLike
joanna Kunicka
/ October 2, 2020If you transfer the property out of the SMSF (in specie lump sum), what day is the “sale” date? Is it a lodgment date or the date when the member had intention to transfer it?
LikeLike
SMSF Coach - Liam Shorte
/ October 2, 2020That’s a contract law question but I would assume it is the date you signed the transfer/contract of sale. I am always careful to recommend you speak to a conveyancer/lawyer in the state the property is situated to be certain. If you are trying to use “intention date” you will struggle as an auditor is always going to want to see documented evidence of a contract.
LikeLike
Eric Choong
/ March 24, 2018I have sold my small business for retirement . I have put in $500,000 as in specie contribution to my SMSF. Is there a special form that I am required to complete and forward to ATO. I am 68 years old and satisfy the work test.
Eric
LikeLike
SMSF Coach - Liam Shorte
/ March 24, 2018Eric you should work with your accountant on this straight away. Please refer to https://www.ato.gov.au/Forms/CGT-cap-election/
LikeLike
Katherine
/ September 8, 2017Hi Liam,
Re one of the paragraph above “ The transfer of the asset will be deemed to be a disposal for the member and any gain realised by the member may be subject to CGT, though there may be some concessions, particularly where the property was used in their own business or that of an associate. If self-employed or able to claim a tax deduction for contributions then some of the transfer can be considered as a Concessional Contribution.” Is that means it’s able to split between CC & NCC for an in-specie (Business real property) contribution for members? How about in-specie listed shares contributions, is able to split between CC & NCC for members?
Thanks!
LikeLike
SMSF Coach - Liam Shorte
/ September 8, 2017Your accountant or SMSF specialist should be able to give you a specific response but in general you can split the contribution of any in-specie asset across cc and NCC of various members except where you are Seeking small business cgt relief for s specific member or stamp duty relief for current owners. Please seek personal advice before proceeding.
LikeLike
Katherine
/ September 7, 2017Hi Liam, I’ve got a question of if ATO allows to split the NCC?
SIS Regulation 7.04(3) Prohibits the fund accepting any fund-capped contributions (single member contribution) in a financial year in respect of a member that exceed the members’ non-concessional contribution cap – is this only applicable for the single member fund?
If two members fund as the example you’ve given above, it’s allowed to split the in-specie NCC between the 2 members to avoid the excessed cap issue?
But why ATO says only CC can be split with spouse, but not NCC?
Thanks,
Katherine
LikeLike
SMSF Coach - Liam Shorte
/ September 7, 2017The rule just stops the fund accepting an amount above the NCC cap for any one member. You can split an in-specie asset contribution between 2 or more members to avoid breaching the Caps. The super splitting rules with CC is where you are using one persons caps to get the money in and then transferring to their spouse usually to improve the balance of a lower balance member, this was specifically designed to help women returning to work or out if the workforce to catch up with their balance. Often you see men with $500k in super and wife with $50k as she has been minding the family and the super splitting rules allow her to maintain some momentum in the growth of her balance. I advise all female clients to ensue their husbands are super splitting to show so,e good faith for them taking time out to raise a family.
LikeLike
Viral Shah
/ August 1, 2017Hi Liam,
There is a situation where a property needs to be removed from a SMSF in-specie. Have both pension as well as accumulation accounts. How can this be achieved? Is it mandatory to physically transfer the cash or can the property be transfer as just a pension drawdown?
LikeLike
SMSF Coach - Liam Shorte
/ August 1, 2017Viral, As always seek personal advice but in general a property can be transferred from the fund as a lump sum in-specie pension commutation (Lump sum withdrawal). It cannot be a normal pension payment as that must be on cash.
LikeLike
Vick
/ July 28, 2017Im confussed on the contribuation one i know the salary sacrifice limit for example my husband earns 4000 .00 gross a wk. we get 400.00 taken out a wk for salary sacrifice that leaves 3600.00 left can we get his enployer to put fhat to our super as a conitrubuation every wk and does that get taxed at the full rate before it goes to super who taxes it the boss or super can u do this he is age 63 please explain
LikeLike
SMSF Coach - Liam Shorte
/ July 28, 2017Total that can be salary sacrificed per year to super is $25,000 less any employer SGC (usually 9.5%). You can also save an additional $100,000 per year after tax to super called non-concessional contributions. Your employer deducts the income tax at your marginal tax rate and then the amount net of tax can be contributed without and further tax on entry to the fund. More info here https://www.ato.gov.au/Individuals/Super/Growing-your-super/Adding-to-my-super/Personal-super-contributions/
LikeLike
David More
/ September 24, 2016Hi Liam,
Can you transfer a parcel of shares out of the SMSF In Specie. I may need this with the new pension limits of $1.6M in pension mode.
Thanks
David
LikeLike
SMSF Coach - Liam Shorte
/ September 24, 2016Yes but only as a lump sum payment not a regular pension payment
LikeLike
Elizabeth Christodoulou
/ June 2, 2016Yes I have a further question about the in-specie contribution above. Does the contribution have to reflect in the accounts the exact % ownership of the tranferors. Case 1: Mum and Dad owned the factory Case 2: only Mum was the owner of the factory Both Mum and Dad are company directors of the business.
LikeLike
SMSF Coach - Liam Shorte
/ June 2, 2016Yes to,get the stamp duty concession. Then property must be transferred for the sole benefit of the transferring owner. Must be written in to the deed. Seek, legal advice for your state.
LikeLike