Q I have a portfolio of shares that I have bought and inherited that I want to move into my Superannuation fund. Do I have to sell the shares or can I just transfer ownership?
A Broadly speaking, superannuation contributions can either be made by using cash or by transferring an asset into the fund. Transferring assets into a fund is generally referred to as an “in specie” transfer or contribution.
Whichever way the contribution is being made, it is important to recognise that it is a Superannuation contribution and normal contribution rules apply. If you are over 65 you must satisfy the work test of 40 hours work in a 30 day period prior to making the contribution.
“In specie” contributions are also subject to contribution limits: For Non Concessional (after tax) contributions, $180,000 per Financial year or $540,000 every 3 years provided you are under age 65. For Concessional (where a tax deduction is claimed) Contributions (subject to eligibility) the limit is $30,000 per Financial year if you were under age 49 at 30 June 2015, or $35,000 if 49 years of age or older at 30 June 2015.
It is important to realise that if you are transferring assets “in specie” to a Self- Managed Superannuation fund (SMSF) you must ensure that the transfer does not breach the law in reference to related party transactions. Provided the shares are ASX publicly listed companies, you should be fine as long as they are transferred at market value. Please check and get advice.
As an “in specie“ contribution transfers ownership from the individual to the Superannuation fund, this will lead to a Capital Gains tax event to the owner transferring the asset. Potentially a capital gains tax liability may arise to the individual transferring the shares. The cost base will be the purchase price of the shares or the cost base applicable at the time you inherited the shares. Capital Gains tax will apply to a gain in the value since the acquisition date and likewise a loss for any shares valued below the cost base at the time of transfer.
If the individual is eligible to claim a tax deduction for Superannuation contributions, they may be able to use this tax deduction to offset the Capital gain by reducing their assessable income. To be eligible, you need to be under 75 and receiving less than 10% of total assessable income from an employer (including Reportable Employer Superannuation Contributions and Reportable Fringe Benefits).
You will need to process the transfer via the share registry applicable to each share and ensure that the transfer value reflects the market value of the shares at the date of transfer. Be careful with your transfer dates to ensure you comply with the requirements for contribution eligibility and applicable contribution limits.
An alternative to “in specie” transfers is to sell the shares in your name and purchase the shares in the name of the Super fund. You avoid the transfer paperwork but you do incur broking costs on the sale and the purchase of the shares.
Finally, it is a widely perpetuated myth that you need to have a SMSF in order to own direct shares. You do not need to have a SMSF to own direct shares in the fund. A number of Public Offer Superannuation funds permit direct share ownership within their fund and also permit “in specie” transfer to their funds.