Transfer Duty Concessions – Self-Managed Super Fund Lawyers

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How to get transfer duty concessions for your Self-Managed Super Fund

Putting business real property into your self-managed superannuation fund makes a lot of sense, but when do the stamp duty concessions apply?

Leigh Adams Business Lawyers located at Sydney and North Sydney can get all the stamp duty concessions (also known as transfer duty concessions) for clients wanting to put business real property into their self-managed superannuation fund. This reduces costs and makes the transaction more worthwhile. What’s more, double duty can be avoided. We are transfer duty specialists.

The sale or transfer of business real property from a fund member into the fund

Members of a self-managed superannuation fund traditionally make contributions in cash. However it is possible for a member to make contributions of assets directly into the SMSF other than cash. These types of contributions are called “in specie” contributions. It is important to note that if the asset is not specifically listed in the Superannuation Industry (Supervision) Act (SISA) or its Regulations, then it is illegal to transfer that asset owned by the member into the SMSF.

Aside from the lower tax rates which apply within a self-managed superannuation fund, the transfer of business real property by a business owner into his or her self-managed superannuation fund, means that the business owner can pay rent to the self-managed superannuation fund and this enhances their capacity to make tax deductible contributions to the fund.

Many States grant concessional duty on transfers of business real property from a member into his or her self-managed superannuation fund.

Duties Act 1997 (NSW)

Section 62A of the Duties Act (NSW) gives a stamp duty concession on the eligible transfer of dutiable property from a SMSF member into their SMSF. This provision applies whether or not the self-managed super fund is buying the real property outright, has to borrow to acquire it, or is simply accepting a transfer of the property to it without paying for it. The nominal transfer duty payable is $500.

This provision requires that the transferor is the sole member of the SMSF, or that the transferred property is held solely for the benefit of the transferor (s62A(3A)). This means that if one member is transferring the property into their self-managed superannuation fund, but there are two or more members of the fund, then the dutiable property must be “segregated” from other fund property.

Property will be segregated where:

(a)   The self-managed superannuation fund trust deed provides that the property is specifically held for the benefit of the member or members transferring or agreeing to transfer dutiable property into the superannuation fund; and

(b)   The property (or proceeds of the sale of the property) cannot be pooled with property held for any other member of the superannuation fund (besides the member or members transferring or agreeing to transfer the property); and

(c)    No other member of the superannuation fund (besides the member or members transferring or agreeing to transfer the property) can obtain an interest in the property (or the proceeds of sale of the property).

In most cases, the requirement for “segregation” means that the self-managed superannuation fund trust deed will need to be amended before the transaction is entered into. Amending it afterwards is too late!

Section 62B of the Duties Act (NSW) applies where borrowing is required by the self-managed super fund to acquire the business real property. This provision states that $500 transfer duty is chargeable on a declaration of a trust made by a custodian of the trustee of a self-managed superannuation fund that business real property is or is to be held in trust for the trustee of the self-managed superannuation fund.

However ad valorem duty must have been paid on the acquisition of the property by the custodian or trustee and the declaration of trust must name the self-managed superannuation fund and it must also state that consideration for the acquisition has or will be provided.

These sections (62A and 62B) are the most important provisions, but as Leigh Adams Business Lawyers are legal transfer duty specialists, you can take it from us that the above comments point you in the right direction. We are located in North Sydney with an associated office in Sydney.

Transfer of real property from the custodian or bare trustee to the SMSF, following the end of an LRBA

Whilst individuals can act as the bare trustee (otherwise known as the custodian trustee), a corporate trustee is preferred to avoid situations where death or other changes in the membership of the fund can change the property holding of the bare trustee.

Section 67A of the SISA, sets out the requirements of a limited recourse borrowing arrangement. Essentially, the asset must be one that the SMSF would be permitted to purchase and own regardless of whether or not it borrowed to buy it.

Following the end of a limited recourse borrowing arrangement, business real property can be transferred from the custodian/bare trustee to the self-managed superannuation fund. Transfer duty in this case in NSW is nominal.

Later Sale by the Self-Managed Superannuation Fund

If the property in the SMSF is sold to a third party then ad valorem stamp duty (transfer duty) is payable by the third party.

Distributing real property in specie to a member of a self-managed superannuation fund as a pension payment

In a 2015 ATO webinar, the ATO was asked whether a self-managed superannuation fund can pay a pension in specie?  The answer was as follows:  “Essentially, a self-managed superannuation fund can pay any super lump sum benefit in specie – that is, pay the benefit in-kind via an asset transfer. Therefore, where a member elects to partially commute their pension, the resulting super lump sum benefit can be paid in specie. Given that a partial commutation can also count towards a member’s minimum pension drawdown requirement then in some circumstances, a pension can be paid in specie”.

Whilst the ATO says that in such circumstances, such a transfer is possible, stamp duty/transfer duty is likely to be payable in such circumstances. It would be paid by the member receiving the property.

If the self-managed superannuation fund is in pension phase and it has business real property, and a member wants to take over ownership of the property, then if the in-specie transfer of the property is made, no capital gains tax would be payable.

The ability to do this is dependent upon whether an in specie transfer of assets is allowed under the trust deed which established the self-managed superannuation fund.

Distribution of property in specie as a death benefit

Regulation 6.21 of the Superannuation Industry (Supervision) Regulations 1994 stipulates that benefits under a regulated superannuation fund must be cashed in as soon as is reasonably practicable after the member has died. These funds can be distributed either as a single, interim or final lump sum payment.  That includes an in specie transfer. Furthermore, a member’s benefits can also be distributed through an income stream which involves a regular series of payments.  In saying that, if a member has died on or after 1 July 2012, an income stream cannot be received unless the individual is a dependant of the deceased.

Transfer duty/stamp duty is payable in all these circumstances.

Transfer in specie from one SMSF to another pursuant to a rollover of a member account

Section 61 of the Duties Act (NSW) provides that there is no stamp duty (transfer duty) on the transfer of dutiable property on a rollover.

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