While it may be possible to move an in-specie asset into an SMSF in separate contributions, it is not possible to pay a pension in the same way by transferring portions of a property out of a fund, a sector specialist has noted.
Strategy Hub co-founder Tracey Besters said superannuation law did not allow a fund to pay a pension via an in-specie transfer of segments of a property and all pension payments must be made in cash, but these types of assets could still be used to fund a pension.
“The only way that you can pay a pension if you’ve got liquidity problems in the SMSF is to commute part of the pension,” Besters said during a presentation yesterday hosted by the Auditors Institute.
“What I often find is that some people have multiple pensions set up over the years and because it was pre-transfer balance cap days, you could actually set up a pension with a much higher balance.
“What we are doing now, if we’ve got liquidity issues, is looking at commuting a pension with a higher taxable component and then paying lump sums out of that or partially commuting if we’ve only got one pension.
“So if you wanted to do an in-specie property transfer, which you can’t do to meet the pension, you could do that as a lump sum instead.
“Of course, the super fund still has to pay capital gains tax on the sale of the property and the individual member is going to potentially have to pay stamp duty on the transfer out as well.
“It is a fairly big deal to have to go down that path and this whole exit plan [for the property asset] becomes part of the exit planning of the SMSF.
“Unfortunately, I don’t see too many SMSFs with a very well-structured concept around what that exit looks like, but rather push that down the pathway because the trustees don’t want to have to think about that.”
