An SMSF specialist has confirmed the in-specie transfer of an asset with a recognised market value carried out by a fund trustee should not trigger the non-arm’s-length expenditure (NALE) rules even if the transaction does not involve a formal purchase arrangement.
To illustrate his point, Accurium technical superannuation adviser Jason Hurst used an example where an SMSF trustee executes an off-market transfer of 10,000 listed securities valued at $25 per share on the day of the transaction, but recognised by the fund for an amount of $200,000.
“So really the value should be $250,000 on that day. Here there’s a problem potentially in the way it’s been prepared, but the way Taxation Ruling (TR) 2010/1DC2 is worded you shouldn’t have NALE when it’s just an in-specie transfer,” Hurst noted.
Specifically, paragraph 25 of TR 2010/1DC2 states: “An in-specie contribution is required to be reflected at its market value in the fund’s accounts and the member’s superannuation interest” and also “if the relevant asset is recorded at less than market value in the fund’s account and the member’s superannuation interest, the trustee is required to update the fund’s accounts and member’s superannuation interests”.
According to Hurst, this prescribed treatment is reinforced by section 66 of the Superannuation Industry (Supervision) Act, which dictates, where allowed, acquisitions from related parties must be performed at market value.
He pointed out the principle is further supported by the market substitution rules set out in section 112-20 of the Income Tax Assessment Act.
“So even if the off-market transfer form includes a value of $200,000, the ATO’s guidance is that, in this instance, it has to be changed to $250,000 in the fund accounts,” he explained to delegates at SMSF Professionals Day 2025, co-hosted recently by selfmanagedsuper and Accurium.
“It means there shouldn’t be any NALE associated with the transaction in circumstances like this where we have no purchase.”
