A sector specialist has confirmed draft Law Companion Ruling (LCR) 2021/2DC allows for an SMSF asset to be acquired through a combination of a payment from the fund and an in-specie contribution as long as certain procedures are followed.
Accurium senior SMSF educator Anthony Cullen noted paragraph 29 of the draft tax ruling stipulates the circumstances by which an asset purchase involving two payment components can occur.
The relevant paragraph says: “An in-specie contribution can be made in conjunction with a complying superannuation fund purchasing part of an asset where a contract makes it clear the fund is only acquiring part of the asset.”
In analysing this paragraph, Cullen recognised there is one component that is absolutely crucial in these situations.
“The paperwork is absolutely everything. Is there a contract? Is it for [payment] of 100 per cent [by the super fund] or is it for something different?” he told attendees of a recent technical webinar.
“At the very least we need a contract for the portion [of the asset] the super fund is paying for or acquiring.
“There may be other paperwork that supports the in-specie transfer.”
He noted legal advice regarding this subject is likely to favour one of two options.
“Some lawyers will approach it [whereby] you can have a contract for 100 per cent of the [asset] transfer, but then provide further details,” he said.
“So [it could be] rather than having a contract for $600,000 for an entire property, the option would be [to specify] $400,000 for two-thirds [of the purchase price to be paid by the super fund] plus additional paperwork for the contribution.
“Or have the [purchase] contract for $600,000, but then also build into it that the $600,000 is going to be made up of a purchase price of acquisition payment of $400,000 and an in-specie transfer of $200,000 to give you that sum total of $600,000.
“Either way the paperwork has to support what is actually happening and what you need to happen.”
