ATO raises concerns for assets acquired as an in- specie contribution continues
Rather, the ATO believes an in-specie contribution can be made in conjunction with a complying superannuation fund purchasing part of an asset where a contract makes it clear the fund is only acquiring part of the asset. In such situations, the fund:
- purchases the interest in the asset specified under the contract; and
- receives the in-specie contribution of the remaining interest in the asset.
The ATO states that the complying superannuation fund will not have incurred non-arm's length expenditure for the purposes of S.295-550(1) or (5) where that part of the asset acquired under the contract is purchased at market value. On the other hand, if the fund pays less than market value for the part of the asset purchased, the ATO believes the non-arm’s length expenditure rules apply even if the in specie contribution relating to the other part of the asset is recorded in the fund's accounts and the member's interest at market value.
It is worth noting that the ATO’s views in LCR 2019/D3 on this matter differ from the long-standing industry practice of treating differences between amounts paid by a complying superannuation fund to acquire an asset and the market value of the asset as an in specie contribution. Further, this stance is somewhat inconsistent with the ATO’s view (in TR 2010/1) that transferring an asset to an SMSF for less than the asset’s market value is considered a contribution to the fund. However, if the ATO is correct in LCR 2019/D3, it will be crucial for contracts to specify that, where applicable, only part of an asset is being purchased for its market value and the other part of the asset is being contributed to the fund (in conjunction with the purchase) as an in-specie contribution.