Well… it’s finally official. The ability to undertake off market transfers of listed shares into SMSFs can continue until 1 July 2013. This Stronger Super recommendation amongst several others has not commenced at 1 July 2012 as expected, with Treasury still working through some significant roadblocks around market manipulation rules contained within the Corporations Act and other areas that may provided a range of unintended consequences.
The Stronger Super website has recently provided further information of the deferred commencement date for several of the measures announced under these reforms to 1 July 2013. These include:
- the banning of off-market share transfers – where an underlying market exists, all acquisitions and disposal of assets between SMSFs and related parties must be conducted through that market;
- a requirement to use a suitably qualified valuer for acquisitions and disposals where an underlying market does not exist, i.e. transfer of business real property;
- providing ATO powers to:
- issue administrative penalties against SMSF trustees,
- issue relevant persons with a direction to rectify specified contraventions within a specified reasonable time,
- enforce mandatory education to trustees where superannuation law legislation has been breached
- having illegally early amounts that have been released to be taxed at the superannuation non‑complying tax rate of 46.5% (currently taxed at taxpayer’s marginal tax rate)
Can the delay be a permanent one for off-market share transfers?
The ongoing drafting issues being experienced by Treasury can hopefully lead to a sensible outcome rather than applying a ‘sledgehammer’ approach to off-market transfers for SMSF trustees. With the proposed changes only affecting SMSFs, not APRA regulated funds, surely there is a better solution suitable for all funds? I have been pushing this barrow for some time (see original blog post), that a better solution would be to introduce measures to limit valuation manipulation for capital gains tax and contribution cap purposes. This could be achieved through an operating standard, which would prescribe acceptable time lines and pricing which the auditor would need to sign off on each year as part of the compliance audit. This approach was taken with collectables and personal use assets, originally recommended to be banned, but after intense lobbying a suitable solution was found.
It is important for the industry to continue pressure on Government to find a more practical solution…