SMSF members may be able to move real estate into their fund through the use of a reserving strategy now applicable due to a change in the superannuation regulations, a legal specialist has noted.
DBA Lawyers special counsel Bryce Figot acknowledged the repeal of the fund capped contribution rules in the Superannuation Industry (Supervision) (SIS) Regulations may have opened the door to using cap space and bring forward mechanisms to move large assets into an SMSF.
“Can you use an in-specie contribution, put it into a contribution reserve and allocate it around in a very flexible manner?,” Figot asked attendees of a technical webinar held last Friday.
“The traditional answer has been you can’t. Why? Because 13 years ago the ATO in their superannuation technical minutes said so.
“This question was asked to them about a partial allocation of the value of an in-specie contribution. The tax office said in that scenario you can’t do it because of the fund capped contribution rules under the definition in [SIS] Regulation 7.04(7).
“However, weren’t the fund capped contribution rules repealed [in 2022]? Yes they were.”
“So although the ATO a number of years ago said you can’t the reason why they said no is because of certain legislative rules which no longer exist, so it might actually now be allowable.”
To illustrate how a contribution reserving strategy would work he gave an example of Betty and George who own business real property worth $1.08 million and on 1 June 2026 wanted to transfer it into their SMSF as a contribution reserve.
On 2 June they would allocate $30,000 of real estate from the reserve to both Betty and George’s member accounts as a concessional contribution, and $120,000 of the asset as a non-concessional contribution.
Then on 2 July 2026 they would allocate a further $30,000 of real estate from the contribution reserve to each member’s account as a concessional contribution, and then trigger the bring forward non-concessional contribution provisions to allocate $360,000 of the property to the individual member accounts.
“Why would you want to do all this? It’s administratively cheaper and easier because you’re only doing one transfer of real estate and paying less fees to conveyancers. Also you can probably get more rent into the SMSF sooner, and you’re transferring all of the property into the SMSF sooner,” Figot explained.
“Although the answer in the past has been no, the reasoning for that no longer stands, because the law has changed, so if anyone’s interested in doing that you could seek ATO input, [because] it may well be allowable now.”
