In Specie Contributions

 By Jason Fittler

In Specie Contributions allow you to move certain assets you own into your Self Managed Super Fund. The benefit of this strategy is that:

There are three main types of asset you can move into your Self Managed Super Fund;

  1. Widely held unit trusts
  2. Direct Equities
  3. Business real property

 Business real property in relation to an entity is defined as meaning:

  • Any freehold or leasehold interest of the entity in real property, or
  • Any interest of the entity in Crown land, other than a leasehold interest, being an interest that is capable of assignment or transfer,

Where the real property is used wholly and exclusively in one or more businesses (whether carried on by the entity or not), but does not include any interest held in the capacity of a beneficiary of a trust estate.

Two basic conditions must therefore be satisfied before an SMSF or any other entity related to or dealing within an SMSF can be said to hold business real property:

  • The SMSF or the other entity must hold an eligible interest in real property
  • The underlying land must satisfy the business use test, which requires the real property to be used 'wholly and exclusively in one or more businesses' carried on by any entity.

Example:

You own the building your business operates out of. It is worth $300,000. You need some new plant and equipment but do not wish to borrow for it. As such you sell your Building into the Self Managed Super fund for the market value of $300,000. You then receive the money to fund your new equipment. Note that you are not able to borrow to do this as such you will need to have the funds already available in the Super Fund. If the Super Fund is short cash there are some other options.

The benefits of this Super strategy are as follows:

  1. Provides needed funding.
  2. The property is now in a low tax environment, which will save tax on lease payments and future capital gains. 
  3. You are able to get more money into super as now your lease payments will go directly into super add your Super Guarantee Contributions you will have more money to retire on. 
  4. If you sell the property when you retire and if your SMSF is in pension phase there is no Capital Gains Tax. 

If you would like more information, please call us (07) 4771 4577.