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Off market transfers of shares between related parties and SMSFs will be banned as of 1 July, 2012.
Generally an off market transfer occurs when a member of a SMSF chooses to transfer ASX listed shares into the SMSF as an in-specie contribution, without actually selling and repurchasing the security on the open market.
The Government believes that curent non-market transactions are not transparent and in some cases do not meet the arm's length agreement which can leead to abuse of the current system. This can occur through the manipulation of a transaction date and/or asset value to achieve a more favourable outcome in terms of contribution caps and capital gains tax.
In order to achieve better transparency the Government has introduced a requiement for related party transactions to be conducted through the market. If no underlying market exists, the transactions must be supported by a valuation from a suitably qualified independent valuer.
Trustees have until 1 July, 2012 to finalise any off-market transactions between related parites and their SMSF, prio to the new rules taking effect.
Trustees considering an on market transaction under the new rules must now be mindful of market volatility, transactions costs as well as the approriateness of the asset.
Source: Super Managers Australia, February, 2012.
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