This strategy involves a taxpayer selling listed securities (whether shares or managed funds) and commercial properties into their super fund. The title of the investments is then in the super fund name and the super fund accounts for any income generated by the investments.
The sale of the investments needs to be done at market prices and may involve a tax liability for the taxpayer (depending on the taxpayer’s original cost price of the investments, the market prices on date of transfer, and whether any small business CGT concessions apply).
In addition, if a commercial property is sold to a super fund then stamp duty costs will need to be considered. Stamp duty costs vary greatly depending on the State Government involved and vary from nil, to concessional stamp duty, to full stamp duty rates.
The benefits of this strategy include:
- The individual can receive a tax deduction for super contributions into the super fund that are satisfied by transferring the investments (subject to the concessional superannuation contributions caps).
- The tax payable on the investment income generated by the super fund investments are taxed at a maximum rate of 15% and can be as low as 0%.
- Investments in a super fund are protected and quarantined if an individual goes bankrupt.
- Depending on the super funds taxable income part or all of the imputation credits on the super fund’s investments may be refundable by the ATO.