BACKGROUND

1. Brown smsf is a sole member fund with Lance Brown who was 70 years of age at death. The fund was 100% in Accumulation phase. When Lance died there was no Binding Death Benefit Nomination in place. There was no Reversionary Pension Benefit Nomination in place. Lance at the time had a wife Julia 58 years of age. The smsf had a corporate trustee with one director being Lance. With his death Julia has now become sole director of the Corporate Trustee for the smsf. There are no other dependants (no minor children etc. ). Lance did have two adult children who are 30 and 36 who work, support themselves and are financially independent.

2. The fund has $1.1 M in assets being $200,000 cash, ASX shares worth $800,000 and Gold Bullion $100,000.

3. We understand that as Julia is Lance's wife she is classified as a Dependant. That it is the intention of the Trustee to make Julia 100% beneficiary of the Lance's smsf member balance.

4. We understand that when a member dies, and his balance is to be distributed to the beneficiary it is called cashing out and to bring the balance down to Nil.

QUESTION 1

Under this process of cashing out does the asset have to physically be converted to cash and paid to the beneficiary as cash? This would result in a Capital Gains Transaction taking place within the smsf. Thus, reducing the proceeds value able to be distributed? Instead of selling the shares and gold bullion is it allowed for an In Specie transfer to be made from the smsf to Julia? That the assets do not need to be converted to cash.

QUESTION 2

Assuming that is permitted to transfer the shares and gold bullion as an In Specie payment would it be deemed that Julia has acquired the shares and gold bullion as at the same date and cost that the smsf acquired those assets. That when Julia sells those shares, she would those acquisition dates and cost bases to work her capital gains tax.