Victorian SMSF duty on transfers in kind

Shaun Backhaus, Lawyer ([email protected]) and Daniel Butler, Director ([email protected]), DBA Lawyers

Many advisers are aware of the potential duty exemption available under s 41A of the Duties Act 2000 (Vic) where dutiable property such as real estate is transferred to a member of an SMSF in respect of their interest in the fund. This potential exemption may also apply following the death of a member in respect of the deceased member’s transfer to a dependant or legal personal representative (‘LPR’) of a member.

Broadly, s 41A provides that no duty is chargeable where property of a superannuation fund is transferred to a beneficiary of the fund if:

(a)     duty was paid on the acquisition by the fund; and

(b)     the beneficiary was a beneficiary when the property first became part of the fund; and

(c)     the value of the property transferred does not exceed the value of the beneficiary’s interest in the fund.

We understand that the Victorian State Revenue Office (‘SRO’) has recently been taking a much stricter approach in the application of this exemption. In particular, the issue of determining who is a beneficiary of the fund and whether they were a beneficiary at the relevant time is being raised. Moreover, in relation to the payment of death benefits to a dependant or LPR, the SRO will review the SMSF deed to determine whether it is drafted appropriately to cover the dependant or LPR as a beneficiary.

We are monitoring the SRO’s position and we strongly recommend that anyone seeking to rely on this exemption obtains advice before completing any transaction. A careful review of the fund’s document trail is needed to ensure the deed and governing rules are appropriate.

Finally, it should also be noted that the provision of state tax advice should be undertaken by a registered legal practitioner. We refer to the article on who can provide tax advice which confirms that a registered tax agent can only provide tax advice on commonwealth law. For more on this point click here.

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This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional.

DBA LAWYERS

31 July 2019