In-Specie Transfer

Dear Nigel,

Great site. I discovered it tonight and I can definetely can tell you know your stuff. I won't start with the trudgery of solicitors and CA's and CPA's etc I have dealt with the last several years and I can see that not many people know there stuff. There are many complex domains at knowledge, regulations, standards, rulings, ACTS at play under the guise of Law, Accounting and Financial Planning. Your comment about warrants and super I remember reading in a Thomson book recently

Anyway..back to the purpose of my post:


Ok - according to your understanding - a CGT event arises if a business real property is transferred across to the super fund?

How should this transfer be executed - is it under the Transfer of Land Act (Vic) eg. normal conveyancing processes? Also are is there a difference between a gift and in-specie transfer? And if so, any advantages? And I assume that Stamp Duty might be waived due to the Duties Act(2000) Vic amendments under s36A s41A of this Act ?

The property is in my name and is about 500k. Capital gain about 400k. I receive rent from this property as a landlord and I am registered for GST (Potential GST issues?) under my name. I have a commercial tenant and rent it out to them. I do not run a business per se on it apart form renting it to it. It is not a residential investment property as it is in investment zoning so I assume the SIS allows this to be covered under "business real property"?

Also, do you know if I can transfer Agribusiness investments to my superfund as well? They just started this year.

Mark

P.S Great site!!!!! I wish you were in Victoria

Any chance to look at this one please?

Hi Markstan

Sorry for the delay - I will respond soon...just been a bit busy.

Cheers
N

Hi markstan
Maybe i can help.
you will have to check the stamp duty issue
Self managed superannuation funds - Role and responsibilities of trustees
This ATO link may help with your definition of Bus Real Property
Agribusiness investments are generally regarded as primary production assets, hence in the same category as Bus Real Property, however i suggest you look at your PDS and also seek specific advice on your product.

An Inspecie transfer is regarded as a disposal for CGT purposes. Hence tax will be payable on your property if you transfer it to your SMSF, unless it was purchased pre 1985. Your CGT liability may be reduced by a tax deductible personal super contribution , provided you meet the criteria.
Have fun
NickM

Thank you for your reply. Just a quicky which you might have missed from th question-

Also are is there a difference between a gift and in-specie transfer? And if so, any advantages?

Is there a GST issue with the in-specie transfer?

Mark

How is a in-specie transfer done? Do you have to go to a conveyancer and go through Titiles office or is it a document or both?

Mark

Sorry it has taken so long to respond...busy time. Nick has already given you some great pointers.

Re the stamp duty point, my thoughts are:

1) Section 36A is not relevant. It deals with discretionary trusts. Also note the reason re s41A.
2) Section 41A appears to me to deal with the situation where assets are already in a super fund and they are transferred out to the beneficiary in specie. I.e. an exemption on you getting your entitlement out (presumably once a condition of release is reached and the entitlement is no longer preserved!). It doesn't appear to me to work the other way i.e. to exempt getting assets into your super fund. Which makes sense when you think about it...once the assets are in trust or in super then they beneficially belong to you as a beneficiary even though legally they're owned by the trustee/custodian. The exemptions in that part of the Duties Act are directed to the scenario where there's no change in beneficial ownership.

BUT I've only had a quick glance at the sections so you MUST get Victorian legal advice on this! I'm not aware if there's any Vic SRO administrative ruling on this.

Re the process, well you'd need a Vic Transfer of Land Act form to convey the property but I wouldn't think you'd put together a sale contract. In any case you'll be assessed on the greater of the price paid or the value for stamp duty purposes - see s20 "what is dutiable value".

Re transferring agribusiness investments to your super...I'm not sure I understand why you would do so?

Also is the structure such that the interests/units are pledged as security for the loan to you? If so then that's a problem because super funds can't grant security over fund assets - see reg 13.14 of the SISR prohibits trustees from giving a charge over, or in relation to, an asset of the fund (save for some carve outs not presently relevant). This regulation is an operating standard for regulated superannuation funds under section 31 of the SISA. Subsection 34(1) of the SISA requires that the operating standards are complied with at all times.

This is a very tricky area, easy to get tripped up - with dire consequences...so please get advice on your specific circumstances.

Cheers
N.

Hi Mark
i am in the process now of co-ordinating an in specie transfer of a commercial property into a smsf

their lawyer prepared the transfer document, but you may be able to do it yourself.

Independent valuation was obtained

GST is payable if the vendor is registered for GST

In my case the vendor is registered for GST - Annually (due March 08)
Purchaser also registered - quarterly

It appears they will be some cash flow advantages for my client !

NickM

OK. I have recently helped a client transfer a couple of commercial properties into a SMSF, one from the individuals, another from a related unit trust where the SMSF owned some, but not all of the units.

Anyway, we managed to get both properties into the SMSF without any Victorian stamp duty.

I have the details of the solicitor I used, so if you are still looking at doing this please contact me and I will give you their details.

I also had some fun with the taxation - but that is a story for another day.

I hope this helps - I know it is probably 6 months too late!

id love to here about this a little more if you wouldnt mind.... yes seems to be a tricky area so the cost of doing it is probably questionable though