Under this proposed change to legislation, trustees who intended to transfer personally held shares to their SMSF would be required to sell the shares on the market, contribute the cash to their SMSF and then buy the shares back via their SMSF. Given shares take several days to clear, this could put trustees in a position where they are out of the market for several days and may be subject to adverse share price movements. 

Aside from the market risk discussed above, our other concern regarding this proposed change was that the restrictions on off-market asset transfers would only apply to SMSFs. Institutions and industry superannuation funds that commonly use this strategy would continue to be exempt.  In our view this was an unfair disadvantage for SMSFs.

Last week the Government finally released their draft legislation regarding this issue. The good news is that the new proposed legislation does not prohibit the acquisition or disposal of listed securities between an SMSF and its related parties, however the mechanism for the transfer of assets has referred to further regulations…which are yet to be released. For the time being, let’s quietly celebrate a minor victory, but hold the raucous applause until further detail is provided.