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SMSF
SMSF Off Market Transfer still alive
Nathan Lear
Partner/Private Client Adviser
30 Jul 2012
A Self Managed Superannuation Fund (SMSF) is prohibited from acquiring an asset from a related party. However there are some exemptions such as listed shares and business real property.
A common strategy used by SMSF trustees is to transfer listed shares, held personally, to their SMSF via an off-market transfer. This strategy allows investors to retain ownership of listed shares by transferring them to the concessionally taxed superannuation environment without the need to sell the asset.
The Australian Tax Office (ATO) recently announced its intention to ban off-market transfers between SMSFs and related parties where an underlying market exists. This effectively spelt the end for SMSF trustees to transfer listed shares to their SMSF and vice versa.
After some confusion as to when the banning of off-market transfers would come into force, the government has finally flagged the start date will be 1 July 2013.
Given an underlying market exists for buying and selling shares (the sharemarket), investors would have to sell the shares on market and then buy them back on market. Given shares take several days to clear, this could put investors in a position where they are out of the market for several days and may be subject to adverse movements of the share price.
The problem with the change of this law involves the Corporations Act. The act prohibits investors from selling shares on market with the intention to buy them back. This is known as a ‘wash trade’ and is currently banned under the Corporations Act as it has the potential to artificially increase the price of shares. This breach could result in serious penalties.
The above poses the question. If investors are unable to transfer shares to their SMSF via off-market transfer and can’t sell the shares and buy them back on the sharemarket, what option do they have? Surely this goes beyond what was initially intended by the government as part of their superannuation review. Remember individuals and corporations will still be able to transfer listed securities via off market transfer after 1 July 2013. Why the discrimination against SMSFs?
Perhaps a better solution would be to continue to allow SMSFs to transfer assets to SMSFs via off market transfer but with clear operating standards to be followed, rather than banning the transfers altogether.
Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.