ATO Raises Concerns About In-Specie Contributions for Assets
The Australian Taxation Office (ATO) has expressed concerns regarding assets acquired through in-specie contributions. They suggest that a complying superannuation fund can purchase part of an asset through a clear contract while receiving the remaining part as an in-specie contribution.
According to the ATO:
- The fund buys the specified interest in the asset as per the contract.
- The fund receives the in-specie contribution for the remaining interest in the asset.
The ATO clarifies that if the fund buys its share of the asset at market value, it won't be seen as a non-arm's length transaction. However, if the fund pays less than the market value, the ATO considers it non-arm’s length expenditure, even if the in-specie contribution for the other part of the asset is recorded at market value.
It's important to note that the ATO's stance in LCR 2019/D3 differs from the industry practice of treating differences between amounts paid by the fund and the market value of the asset as an in-specie contribution. This stance also contradicts the ATO's view in TR 2010/1 that transferring an asset to a self-managed super fund (SMSF) below its market value is considered a contribution.
If the ATO's position in LCR 2019/D3 is correct, it's crucial for contracts to specify that only part of an asset is being purchased at market value, while the rest is contributed to the fund as an in-specie contribution.
For any questions, feel free to reach out to Tax Ideas Accountants & Advisers at +61 2 83181545 or book an appointment through our live calendar.
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