Contributing Shares To Your Smsf

Contributing Shares to your SMSF

What you need to know

Many investors have a personal share portfolio. When it comes to your SMSF, did you know that you can contribute more than simply cash? You are also able to contribute listed shares.

What are the advantages of transferring personal shares to your SMSF?

Tax benefits

Any dividends and capital gains received will be taxed at the concessional SMSF tax rate, rather than your higher marginal tax rate.
If the dividends are eligible for franking credits, those franking credits can be used to reduce the tax liability of the fund
Any dividends and capital gains received by the SMSF may be tax free if the shares are used to help pay a pension to a fund member

Asset protection

Assets held in SMSFs are generally protected from creditors in the event of bankruptcy.

Are there any disadvantages

Transferring shares from your name to your SMSF will trigger a Capital Gains Tax (CGT) event and you could incur a CGT liability or crystallise a capital loss. Depending on your circumstances you may be able to apply the 50% individual CGT discount to reduce any capital gains tax liability.

We suggest you discuss the transfer with your tax adviser before going ahead.

What you need to know before you get started

What shares can I contribute to my SMSF

Under the superannuation investment rules, the trustees of an SMSF are generally prohibited from acquiring assets from members and other related parties of the fund. However, an exemption to this rule includes any securities (such as shares, bonds and options) that are listed on the ASX (as well as any other approved stock exchanges1) so long as they are transferred at market value.

Another exemption includes units held in a widely held trust, such as units in a retail managed investment fund transferred at market value.

For more information on the types of assets that you can contribute to your SMSFs and the rules that apply please speak to your financial adviser.

How do I contribute my shares to my SMSF?

To contribute your shares to your SMSF, you need to transfer the legal ownership of the shares to the trustee(s) of your fund. Completing an off-market transfer form does this.

Depending on whether the shares are issuer or broker sponsored you will then need to forward the completed form to either your share broker or to the company share registry.

Is there a limit to the contributions I can make each year?

When considering making super contributions, it’s important to assess how much you are contributing to your super in any one year. The government has set annual limits; known as contributions caps.

The annual contribution caps for 2017/18 are:

$25,000 per year for pre‑tax contributions (concessional)
$100,000 per year for after tax contributions (non‑concessional) or $300,000 over a three‑year period if you are under 65 in the financial year you make the contribution.

It is important to keep your adviser informed about any contributions you make so they can ensure you don’t exceed these caps. From 1 July 2013, excess concessional contributions made are effectively taxed at your marginal tax rate plus interest charges, while excess non-concessional contributions are taxed at 49% unless an offer to refund is accepted. If accepted, an associated earnings amount will be taxed at your marginal tax rate.

Your SMSF investment strategy

Before transferring any shares to your SMSF, you should confirm that the shares be consistent with the fund’s investment strategy and that they will allow you to achieve your retirement goals. Your financial adviser can assist you to update your investment strategy if needed.

Transfers must be at market value

Where a trustee accepts a contribution in the form of shares via an off-market transfer, the transfer must be done at market value. As a guide, the market value for a listed share is generally the closing price of the share on the date of transfer.

Value of contribution preserved until retirement

All contributions made to superannuation are subject to preservation and may not be released back to you until you have satisfied a condition of release, such as full retirement after reaching your preservation age (56) or turning 65.

Employee share schemes

Where you are entitled to receive shares under an employee share scheme, you may be able to nominate your SMSF to receive the shares. However, prior to nominating your SMSF you should confirm that this will be permitted under your SMSF’s investment rules and that you understand the tax implications of nominating your fund.

For more information regarding nominating your fund to receive shares under an employee share scheme, please speak to your financial and taxation adviser.

How your financial adviser can help

A financial adviser can help you assess all of the relevant issues and provide advice on whether transferring shares to your SMSF is an appropriate strategy for you and your fund.

Speak to us for more information
If you have any questions, please call SMART Financial Planning for Life on 03 5911 7000.

Important information
This document has been prepared by Count Financial Limited ABN 19 001 974 625, AFSL 227232, (Count) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. ‘Count’ and Count Wealth Accountants® are trading names of Count. Count advisers are authorised representatives of Count. Count is a Professional Partner of the Financial Planning Association of Australia Limited. Information in this document is based on current regulatory requirements and laws, as at 26 June 2017, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Count, its related entities, agents and employees for any loss arising from reliance on this document. This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision. Taxation considerations are general and based on present taxation laws, rulings and their interpretation and may be subject to change. You should seek professional tax advice before making any decision based on this information. Should you wish to opt out of receiving direct marketing material from your adviser, please notify your adviser by email, phone or in writing.