Ban on SMSF in-specie contributions dropped
After the fuss generated by the government’s decision last year to ban related party off-market asset transfers, self-managed superannuation funds (SMSFs) can rejoice following the quiet removal of the proposed amendments from legislation that passed the House of Representatives in early June.
Under the initial proposal, the government announced that off-market transactions that result in a contribution being made to an SMSF in the form of an asset – otherwise known as in-specie contributions – were to be no longer permitted.
The move followed the Cooper Review findings that pointed to a lack of transparency and the potential for greater abuse of related party off-market asset transfers when compared to non-related party transactions.
Now that these amendments are not coming into effect on July 1, 2013 as previously intended:
- off-market asset transfers from a related party to an SMSF are still permitted
- an independent qualified valuation will not be required when acquiring business real property from a related party or for disposal of real property to a related party, (however arms’ length transactions are necessary for all SMSF dealings), and
- measures will not be introduced to prevent the disposal of assets to related parties, unless otherwise covered within superannuation law (e.g. collectables).
The SMSF Professionals’ Association of Australia (SPAA) welcomed the government’s decision, saying it would have imposed “inequitable and costly compliance conditions” on SMSFs looking to buy or sell assets to or from related parties.
“SPAA was especially concerned about increased costs for SMSFs transferring listed securities from a related party into the SMSF and is pleased to see that SMSF trustees will not be faced with increased costs,” SPAA chief executive Andrea Slattery said.
“The proposed legislation also removed the existing requirement that an SMSF must intentionally acquire an asset from a related party in order to fall foul of the law. This could have seen more SMSF trustees penalised by the legislation where they have made an unintentional mistake,” she added.
According to Slattery, another problem with the proposed amendments, as they stood, was the requirement for qualified independent valuations every time a transfer of business real property took place into or out of an SMSF.
In the area of collectable investments and SMSFs, the SPAA also had concerns. “The simple fact is that for some collectables it is difficult to find valuers and professional advisers who have the specific knowledge, experience and judgement to make a decision,” said Slattery.