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Edited version of private ruling
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Ruling
Subject: In specie contribution to a superannuation fund
Question:
On what date was the in-specie contribution made to the superannuation fund?
Answer:
The contribution is made when the off-market share transfer has been completed to registrable form.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commenced on:
1 July 2007
Relevant facts and circumstances
The Fund is a self-managed superannuation fund.
One of the members (the Member) of the Fund owned a number of shares in a listed public company (the Company).
In May 20XX the Member made an off-market transfer of his shares from the Company to the Fund.
The off-market transfer form was not received by the broker in May 20XX. The stamped receipt date on the form was in mid June 20XX. However, there was a second stamped date on the form indicating it was received in late June 20XX.
In late June 20XX the broker completed the off-market transfer form.
The shares were not recorded on the share registry until September 20XX.
Reasons for decision
Summary
The trustee of the Fund acquired the beneficial ownership of the listed shares from the Member on the day the off-market transfer was completed to registrable form i.e. in late June 2008.
Detail reasoning
In-specie contributions are contributions to a superannuation fund in the form of an asset other than money.
Trustees of regulated superannuation funds are generally prohibited from intentionally acquiring assets (including in-specie contributions) from related parties of the superannuation fund. The limited exceptions to the general rule are provided in subsection 66(2) of the Superannuation Industry (Supervision) Act 1993 (SISA) and include listed securities and business real property, which must be acquired at arm's length and at market value.
The Commissioner has issued Taxation Ruling 2010/1 (TR 2010/1) titled Income Tax: superannuation contributions to give guidance on such issues. In respect of on what date has an in-specie contribution been made, the following paragraphs are relevant:
Transferring an existing asset (in specie contribution)
18. The fund's capital will be increased when a person transfers an asset to the superannuation provider but the provider pays no consideration or pays consideration less than the market value of the asset.
19. For example, a person might transfer shares they own in a stock exchange listed company to the superannuation provider to make a superannuation contribution.
20. A contribution by way of a transfer of an asset will be made when the superannuation provider obtains ownership of the asset from the contributor. The Commissioner accepts the superannuation provider obtains ownership of an asset when beneficial ownership of the asset is acquired and that beneficial ownership can be acquired earlier than legal ownership.
…
24. A superannuation provider acquires the beneficial ownership of shares or units in an Australian Stock Exchange listed company or unit trust when the provider obtains a properly executed off-market share transfer in registrable form.
The following example from TR 2010/1 illustrates this particular situation:
Example 7 - when in specie contribution of shares is made
85. On 26 June 2009, Cheung signs an off-market share transfer form to effect a contribution of shares from herself to Cho Pty Ltd, the trustee of her self-managed superannuation fund. However, Cheung leaves certain parts of the form blank for completion by her stock broker, as her shareholdings, and those of Cho Pty Ltd are broker sponsored. Cheung posts the transfer form to her broker on the same day.
86. Cheung's broker adds the omitted information on 2 July 2009 and completes the transfer through CHESS. Cho Pty Ltd is registered as a shareholder on 5 July 2009.
87. Cheung's contribution will be made on 2 July 2009 as it is not until that day that the relevant transfer has been completed to registrable form.
In this case, the Member of the Fund made an off-market transfer of listed shares (via an in-specie contribution) to the Fund in May 20XX.
The off-market transfer form was not received by the broker until mid June 20XX.
The broker completed and forwarded the transfer form to the share registry in late June 20XX and the shares were registered on the share registry in the 20XX-XX income year.
In this case, the trustee of the Fund acquired the beneficial ownership of the listed shares from the Member on the day the off-market transfer was completed to registrable form i.e. in late June 20XX. Therefore the Member's contribution was made in late June 20XX.