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A two member SMSF which held private secured notes (unrelated parties) as the major asset has rolled the members' funds to two new SMSFs by way of in specie transfer of the secured notes. This seems like an acquisition from a related party (the old SMSF) by the new SMSFs which we are now auditing.
Is an in specie rollover of this type of investment allowable by the SIS Act?
Thank you both! Much appreciated
The critical question in this scenario is whether or not an in-specie transfer is considered to be "acquiring an asset". If it does (which I think it does) the requirements of section 66 are enlivened and the fund cannot accept it unless an exemption applies. I note, Section 66 states, "acquire an asset" does not include accept money.
Hi Kate
Yes I agree I cannot see how a SMSF can rollover an asset to a related party SMSF unless that asset is cash, listed shares or business real property due to the requirements of section 66 of SIS (unless they meet one of the exceptions).
SIS does allow exceptions to transfer of secured notes between Funds if there is a:
1) merger between Funds (SIS section 66(2)(c), or
2) transfer of assets from one Fund to another Fund due to the breakdown of a relationship (SIS section 66(2B)).
I would ask the trustee / accountant on what basis was the transfer of assets allowed?Did they obtain professional advice that the transfer was allowed? If not allowed under SIS did they request that the ATO allow the transfer to occur?
Thanks
SMSF AAA