Self Managed Super

If you have a SMSF with a partner and are separating, can you dismantle the SMSF and roll the shares in the SMSF into a new fund (i.e. Australian Super, Host Plus etc) or do you have to sell everything (and pay CGT)?

 

You should be able to roll it into a new fund.

 

In specie transfer can be permitted but can complicate matters somewhat. If transferred the sale still triggers a CGT event since the SMSF no longer owns them. The asset will transfer out and leave the fund with a tax liability that will be shared by the former members as a earnings allocation...That may not work.

Many receiving funds will limit inspecie rollovers too. The rollover benefit statement will not equal the value received and they may refuse the rollover !! There is a quirk is the SIS Act and Regs that means the VALUE of the shares on the date received is the value the receiving fund must use. But the RBS will show what the shares were worth the day or two prior.

Its easier to cash it all down, payout liabilities and then rollout. Its not a straight fwd process and a experienced adviser should be consulted. Things like the audit must also be completed. Yes - audit report for $0 of assets

 

can be rolled over without triggering CGT if there is a court order
s 126-10 ITAA97 from memory - or nearby.

 

Link to Terry's comment

 

looks like s126-15 was the relevant section:
INCOME TAX ASSESSMENT ACT 1997 - SECT 126.15 CGT event involving company or trustee

 

I believe the OP questions concerned a choice by members to wind up a fund. No rollover applies unless its ordered.. Usually such orders are spouse A to transfer $X super to spouse B and specific assets are not mentioned. But could be. I had a client seek such orders for a specific property. But it wont save CGT.

Rollover does not apply to a fund trustee recipient. Only to a spouse/fmr spouse...The final part of s126-15(1) refers to individuals as the recipient. See underlined>>>>
(1) There are the roll-over consequences in section 126-5 if the trigger event involves a company (the transferor ) or a trustee (also the transferor ) and a * spouse or former spouse (the transferee ) of another individual because of:

Otherwise CGT could be bypassed. A contribution or rollover is measured at its value on receipt. Refer TR 2010/1.

 

When we set up our SMSF it seemed pretty easy to roll each persons fund into the Self Managed Super Fund from say AMP or MLC, why is it not easy to exit the same way and roll back into an AMP or MLC (or Industry Funds i.e. Australian Super, CBUS etc)?

 

Public funds wont do a inspecie rollover to a SMSF. Rollovers from public funds are always cash. There is a lesson in that. SMSFs are just micro versions of big funds.

Public funds dont individually buy assets for each member. Instead they unitise the investments in pools. Members have proportionate rights only - Not a specific asset entitlement. SMSFs microscale this and if there are two members its rare that ONE of them has a specific asset allocation. Even if they did, the funds assets comprise total assets less liabilities (eg actual or even accrued tax). Transfer of an asset ignores the net position.

Cash rollovers are far easier. There is no CGT to be saved. The brokerage to replace assets is trivial and just one of the costs that is inevitable. The winding up costs and part year income entitlements also may comprise a liability that affects net assets.

In its worst case the fund could have negative assets and a problem.

 

Doesn't directly answer your question but why not leave the SMSF in place, the leaving partner exits and their balance is rolled over to their choice of fund. Much easier to do with a Corporate trustee.

When the dust settles, you can proceed with an orderly exit if you choose too.

 

Thanks for the replies above, sounds easier to sell a portion if one person leaves and pay that amount to that persons new super fund

Minus CGT I guess, or the other person will cop that on the next return

 

Yes, adjusted for the accrued CGT....However, CGT is only triggered when assets are sold. However if a deferred tax liability is recognised then adequate provision can be allowed for the whole of the accrued tax making the adjustment to both member entitlements clear. A deferred tax liability recognises the accrued CGT based on accrued gains.