Question of the Week

Question of the week – Transferring shares into an SMSF

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Q: I want to transfer shares from my personal account into my SMSF as part of my $150,000 non-concessional contributions for this tax year. Should I wait until after Swannie’s budget to do so and are there any restrictions I should be aware of? My SMSF is worth about $600,000 at present and I’d like to transfer about $100,000 -$120,000 worth of shares.

A: I don’t think there is any risk of Mr Swan touching the $150,000 cap on non-concessional contributions in the Budget. So in that sense, there is no need to rush it.

That said, there are two other important considerations:

  1. The transfer will be considered to be a ‘disposal’ for capital gains tax purposes. So, depending on the cost price of the shares and other capital gains/losses incurred, you (personally) may be liable to pay capital gains tax. Timing to optimise the tax impact may be important; and
  2. Under “already announced” changes, off market transfers are going to be a lot harder to execute from 1 July 2013. The ATO has announced that it proposes to change the rules relating to ‘related party transactions’. From 1 July 2013, a transfer of shares between the SMSF and a related party will need to be conducted through the underlying market (i.e. the ASX). That will mean going to a broker and asking them to arrange a purchase and a sale transaction at the market price. This may mean extra transaction costs – and will certainly remove any flexibility in relation to optimising the transfer (disposal) price.

So, while there is no immediate urgency to make the contribution, I would certainly be arranging it well before the end of the financial year.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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