Example: Asset Purchased Below Market Value Without In-Specie Contribution
In 2019, Keri, managing her SMSF, bought ASX listed shares from a related party for $250,000, while their market value was $500,000. Despite the shares' true value, the agreement stated the purchase price as $250,000, not $500,000. As per the ATO in LCR 2019/D3, this setup didn't involve an in-specie contribution to the SMSF, even if the fund accounts for it as such.
The ATO views this transaction as non-arm's length, suggesting it's a scheme where Keri's SMSF spent less capital than expected. Consequently:
- Any dividends earned by the fund from these shares will be considered NALI (non-arm's length income).
- Any potential capital gains from selling these shares will also be treated as NALI.
For assistance or queries, reach out to Tax Ideas Accountants & Advisers at +61 2 83181545 or book an appointment through our live calendar.
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