THE AUDITORS INSTITUTE | FORUM

Archived Forums

When you become a member of The Auditors Institute, you immediately gain access to expertise, advocacy for your profession and peace of mind.

Ask a question in our members-only forum or use the search function to find prior technical discussions on your topic. You can expect a response within 24-48hrs.

Want to become a Member?

Join Now

Already a Member?

Disclaimer

The forum is made available by The Auditors Institute Ltd for the benefit of it’s members only, and its primary purpose is to facilitate education, training, and discussion between members. The information and answers provided within the forum are of a general nature and do not consider any specific circumstances, objectives, financial situation or needs related to the matter/s raised. The responses should not be construed as financial advice, and each Member should seek their own professional advice before making any decisions. The Auditors Institute Ltd and its representatives are not responsible for any actions taken based on the information provided in the forum.

To test this feature, visit your live site.

Jun 16, 2023

Disposal of investment to a member at market valuation - What is an arms length one ?

in SMSF Technical Forum

A client SMSF seeks to dispose of units in a LM First Mortgage Trust which has been frozen since 2009 with all transactions suspended and a liquidator was appointed. Client trustee proposes to transfer the units at market value to sole member of the SMSF preparatory to winding up the SMSF in 2024 year. The units were valued at $ 0.04 per unit by LM on 31 May 2023 and next value may be after 30 June. If Transfer to the sole member is prepared today is that valuation acceptable so that it does not breach section 295 550 1 a to c. ? Total amount of "market value" is olny $ 360 and the SMSF may incur a capital loss of $ 6500. The Liquidator of LM continues to charge and the Investment is apparently almost worthless. I have warned the client that the transaction must be supported by a market valuation. Any payment by the member will be immediately after the transfer is processed.

2 comments

Comments (2)

THE AUDITORS INSTITUTE

Jun 16, 2023

From a SIS perspective you have to comply with section 109 of SIS in that an asset must be transferred at market value (& on an arm's length / commercial basis).

If the asset has been valued at $0.04 at 31/5/2023 then yes from a SIS section 109 perspective this would be correct to transfer the units at this value re the market value issue.

My concern is that is the SMSF able to transfer units in a Trust that is in liquidation? You should check with the liquidator. If they say no the tax agent or trustee could request that the ATO allow the SMSF to be wound up given the small value of the units.

My understanding is that trustees sometimes take a practical approach re such investments and write them off or sell them to a related party at an estimated value (re shares / units that are suspended or in liquidation). This may not be technically correct.

You should also refer:

https://www.delisted.com.au/sell-worthless-and-other-securities/

If other members of the forum have a view re this query please let the forum know.

Thanks

SMSF AAA

Unknown member

Jun 19, 2023

Replying to

Thanks - Just to clarify the context of the question. The units in the listed Trust are just one of many investments the SMSF has. The Administrators of the Trust have provided the valuations now and again and the value is going donw. The t rustees want to dispose of the investments in compliance with the market value requirement. The question is could the date of the disposal and the ability to obt ain an appropriate valuation at the time. The t ransfer was drafted weeks ago but they cant back date the transfer. I guess they have to wait for a valuation to be published and jump on the transfer documentation then- not that its going up.