Off-market Transfer

An SMSF Trustee can acquire listed securities, such as ASX-listed shares and business real property from a related party at its market value. This is known as off-market transfer. The market value requirement means the SMSF must pay the related party a value for the asset that would be paid in an arm’s length and at market price. Obtaining a current listed share value is extremely easy since share prices are listed daily on Stock Exchanges. In terms of the valuation of business real property , you might need to engage a qualified independent valuer. It’s also important to remember that off-market transfer might trigger capital gain tax in your personal capacity when selling the assets to the SMSF.

If an individual makes a super contribution to an SMSF in the form of an asset other than money, this type of contribution is known as an in-specie contribution. One of the key attractions to an SMSF is the ability to move certain assets from outside the superannuation environment into the Fund. Generally, an SMSF Trustee is not allowed to acquire assets from a related party but there are some important exceptions. The two key exceptions include:

Definition of business real property

Business real property generally means land and buildings used wholly and exclusively in a business. The underlying land must meet the business use test.

Business use test

All of the entity’s activities are relevant to whether it constitutes a business being carried on, which includes:

  • The keeping of business records separately to personal records.
  • The size of the operation and the extent of capital investment involved.
  • Whether activities are conducted continuously and systematically rather than on an ad hoc basis.
  • The engagement of employees.
  • A purpose and intention to carry on business.
  • A level of repetition and regularity of activities constituting the business.
  • Whether activities are carried on similarly to other like businesses.
  • Whether activities are planned, organised and carried on in a businesslike manner.
  • The scale and permanency of operations.
  • The existence of a business plan

Listed securities or business real properties can be transferred into the SMSF by way of an in-specie contribution or off-market transfer. However, please be mindful of the annual contribution limits when making an in-specie contribution. For more information on the contribution caps, please refer to here.

For further guidance on in-specie transfers and the Taxation Ruling surrounding off-market transfers, please see here.

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