Selling of personal shares then buying again in SMSF

Discussion in 'Superannuation, SMSF & Personal Insurance' started by kaibo, 28th May, 2020.

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  1. kaibo

    kaibo Well-Known Member

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    Seems more tax efficent as don't have to hold on to things for over a year to get maximum CGT tax discount (around 24% vs 48%), SMSF (10% vs 15%)

    Also spare non super money in offset is worth around 2.7% on PPOR (or around the same after tax on a IO loan) so might as well leave it there as not going to get that no risk return in Super environment and cash is good to have in non-super environment

    Any other considerations, I already have a SMSF sitting mainly in cash
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    too many to list!

    Is the selling and purchasing in your own name connected to the SMSF buying?
     
  3. kaibo

    kaibo Well-Known Member

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    selling out personally to market, then buying again from the market in SMSF to make a new portfolio, obviously some overlap but SMSF not buying from the ones I am selling
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    are you selling and then contributing the sale funds to the SMSF to buy the shares? If not I don't see the connection between the 2. One could happen independently of the other.
     
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  5. Mark F

    Mark F Well-Known Member

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    I am surprised by your statement
    As far as I am aware you still need to hold for a year to get the 10% smsf rate.
     
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  6. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Super mainly in cash in a smsf sounds like a poor strategy and a costly one too. May be signs of poor strategy and the choice to establish a smsf may lack a sound basis. I used to work in financial markets and there is a rule of markets. You are either in the market or out of it. And if you are out of the market you will lose money.
     
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  7. kaibo

    kaibo Well-Known Member

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    definitely a bad strategy but entered it as was thinking about property 2 years ago but the RC happened and don't see much value in Melbourne real estate around 600K (yield or CG) and the interest cost are a bit higher as well. Finally got around to doing something with it so will be getting into some Shares. Have bought a bit of shares outside of SMSF before

    15 to 10% is a lot better than 45 to 22.5%. Often I find myself holding on to shares just to get the discount and with the difference only being 5% it becomes more pure investing
     
  8. FXD

    FXD Well-Known Member

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    What if using SMSF strategy to take the opposite to an individual's portfolio position as a hedge?
    If individual portfolio makes $, SMSF suffers, if individual portfolio loses $, SMSF makes money.

    That's probably the only reason I will consider using SMSF for but unsure if this is considered
    legit or not.
     
  9. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    That makes no sense whatsoever. Not an offence. Just daft. Why not just stay out of the market ? The investmnet position of the SMSF can be made to support and assist the nmeeds of members but as a stand alone position.

    You are suggesting ~ Buying shares in own name and BBOZ in SMSF . Then when personal goes up your super is harmed and vice versa.

    For a pure SMSF perspective the (fund) investment strategy wouldnt be acceptable written that way. It plans to allow a smsf to lose money and the strategy could breach the sole purpose test indirectly. It would be enough to be a reportable issue to the ATO for them to consider if it is a element of early release scheme. Its illogical to invest super to knowingly plan to lose $$.
     
  10. FXD

    FXD Well-Known Member

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    Yeah I know it makes no sense that's not the original intent & purpose how I actually want to
    describe it actually on re-read of my own posting. :)

    The hedge is really meant to be on personal side taking the opposite position instead or buying
    put options against SMSF positions. Will never set up SMSF with plan to lose $$ of course.

    The SMSF is still planned to be making $$$, but my thought is what if I can also lock in some
    potential profits with put option outside SMSF. When market reverses before put expires, sell off
    the puts and contribute the proceeds back into SMSF.
     
  11. kaibo

    kaibo Well-Known Member

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    I can see a point for this as outside of Super you can easily get a risk free return of over 2% via offset account of primary residence or offset account of investment property loan.

    In SMSF this could never happen as savings interest rate around 0.1% on the platforms

    So holding cash outside of Super could have more benefit than in Super
     
  12. Superman__

    Superman__ Well-Known Member

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    Not sure if anyone actually answered your original question, but yes, it's OK to sell shares personally (triggering a capital gain / loss in the process) and then separately buying in the SMSF.

    You can also in-specie transfer in shares listed on an approved stock exchange from you personally to your SMSF (contribution) or your SMSF can buy them off you for cash at market value.

    Doing on the market (rather than off market transfer forms) is probably easier and faster - especially if your are buying different shares.
     
  13. FXD

    FXD Well-Known Member

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    what is the criteria differentiating selling shares as capital event vs income event?
     
  14. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    A SMSF is NOT a personal asset and you are confusing the two. A persons overall market exposure should consider in / out of super but the objective of all super strategies should be to protect capital and produce future retirements benefits for all members. I see this no different outside super.

    eg Accumulating excessive cash (beyond fund expected needs) in super seems illogical if the members have preserved benefits. The cash in super is not available to the members. And in pension it may be illogical to earn low rates v's tax free other forms of investments that produce higher income. There are many forms of listed investment capable of ready conversion to cash within 2 days. One of the most defined trends in SMSFs for several years has been the flow of funds away from term deposits to income producing shares and ETFs

    I know many SMSF that earn 5.5%+ after tax in a SMSF risk free using a offset account. Its a strategy that can suits those with a limited recourse borrowing facility (only). Provided the lender also offers a offset.
     
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  15. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Two options:
    1. SMSF can buy listed shares at market value (s66 SIS Act) OR
    2. The shares can be transferred inspecie (s66 SIS Act also) . This requires that the market value of the shares be treated as a member non-concessional (or concession) contribution to the fund. refer to tax ruling TR 2010/1.
    A key difference : Option 2 requires the value on the date received by the fund not the date contracted. Option 1 is based on the contract date. Option 2 can leave a variance between the CGT value and the contribution value as a blackhole

    In each case the owner of the shares incurs a CGT event. In 2, the owner (or spouse etc) may also add to the super balance AND even obtain a tax deduction, if available and subject to that persons taxable income and caps.
     
  16. kaibo

    kaibo Well-Known Member

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    In my scenario it's just me and my partner in the SMSF. When we look at our overall balance sheet you need to look where the Super is invested in. Even though technically it's not a personal asset you need to take it into account in making investment decisions. If I am over exposed in property outside of super then buying a property in Super would be a bad idea.

    I think it is fine to look at it as a tax efficent asset that can't be cashed out for a while.