Off-market transfers between SMSFs and related parties

Government drops new rules from the Tax and Superannuation Laws Amendment

(2013 Measures No 1) Bill 2013

What it means?

The Super System Review (Review into the governance, efficiency, structure and operation of Australia’s superannuation system) was concerned that the off market acquisition and disposal of assets between related parties and SMSFs, where both the buyer and seller can effectively be the same person, lacked transparency, was inherently risky and thus open to greater abuse than non-related party transactions.

The Review Panel believed that the current provisions regulating related party acquisitions were insufficient to mitigate the risk of transaction date and asset value manipulation to illegally benefit the SMSF or a related party. The Panel did, however, conclude that SMSFs should retain the ability for SMSFs to conduct certain limited related party transactions.

The Review therefore recommended that acquisitions and disposals of assets between related parties and SMSFs should be conducted through an underlying market where one exists, or where one does not exist, must be supported by a valuation from a suitably qualified independent valuer.

The Government has decided not to proceed with its proposed new rules for the acquisition and disposals of certain assets between SMSFs and related parties from 1July 2013. The Government has given no clear reason as to why the amendments relating to SMSFs were deleted from the Bill. The Coalition however had previously indicated that it would oppose the amendments and had suggested that there were concerns from the SMSF industry about the practical difficulties with the proposed valuation requirements.

For Listed securities

SMSF trustees will still be able to acquire listed securities from related parties provided they are acquired at market value after 1 July 2013.

For Business real property

A trustee of an SMSF may acquire an asset from a related party if the asset is business real property acquired at market value, this will no longer have to be determined by a qualified independent valuer as proposed from 1 July 2013.

What do SMSF members and Trustees need to be thinking about?

If SMSF trustees were considering off market transfers of personally held listed securities to their SMSF then it will no longer be critical to conduct those transfers before the end of this financial year, 30 June 2013.

We will keep you up to date of any further announcements.

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