The criteria include that the unit trust has no borrowings.<\/p>\n
Accordingly, such unit trusts are often referred to as \u2018non-geared unit trusts\u2019 or \u2018reg 13.22C unit trusts\u2019 or \u2018div 13.3A unit trusts\u2019 (because these conditions are contained in div 13.3A).<\/p>\n
The typical scenario<\/h3>\n
Many SMSFs own units in related non-geared unit trusts. These unit trusts typically own real estate.<\/p>\n
The SMSF may well want to purchase further units in the unit trust. This could be because the unit trust needs more money to acquire new real estate or improve existing real estate.<\/p>\n
Alternatively, it might be because the unit trust has declared distributions to the SMSF and the SMSF wants to offset them rather than receive cash.<\/p>\n
Assuming the conditions in div 13.3A are satisfied, the SMSF is typically able to acquire further units.<\/p>\n
Legislative change<\/h3>\n
The Tax and Superannuation Laws Amendment (2013 Measures No. 1) Bill 2013 (Cth) proposes to implement a requirement that would mean that any further units acquired in a non-geared unit trust must be acquired at market value as determined by a qualified independent valuer<\/em>.<\/p>\n This change would apply to all units acquired from 1 July 2013. See the proposed s 66A(3)(d)(ii): www.comlaw.gov.au\/Details\/C2013B00016<\/a><\/p>\n The logical person to determine the market value is the accountant who prepares the financial statements of the SMSF and the unit trust. That accountant may well be qualified<\/em>.<\/p>\n However, is that accountant also independent<\/em>?<\/p>\n The Bill does not define qualified independent valuer, but the explanatory memorandum states:<\/p>\n The valuer … should be impartial, unbiased and not be influenced or appear to be influenced by others.<\/p>\n If the accountant has been remunerated by the SMSF and\/or unit trust for many years, it is difficult to say that the accountant appears<\/em> independent.<\/p>\n Interpreted strictly, the new law may well mean that, from 1 July 2013, each time an SMSF wishes to invest more money in a non-geared unit trust, a new accountant needs to be engaged to determine the market value of the units.<\/p>\n We would hope that a practical approach would be taken in administering the law and the current accountant could determine the market value.<\/p>\n However, even in this situation, performing the full market value determination each time the SMSF wants to acquire further units could give rise to significant accounting costs.<\/p>\n We suspect there is a more practical solution, but only for those who act promptly. Firstly, consider the \u2018mischief\u2019 that this law is aimed at, namely the:<\/p>\n … risk that related party transfers that occur \u2018off-market\u2019 or outside a formal market may involve transaction date or asset value manipulation to illegally benefit the SMSF or related party, for example, by circumventing the contribution caps and avoiding tax liabilities.<\/p>\n However, where the SMSF owns all the units in the non-geared unit trust, this risk does not arise. Nevertheless, the new law will apply to such SMSFs.<\/p>\n In light of this, consider an SMSF that subscribes for a significant number of units before<\/em> 1 July 2013. The units might only be partially paid.<\/p>\n As the non-geared unit trust needs more money, it might simply call on some or all of the unpaid portion, This course of action should be effective because typically an asset is \u2018acquired\u2019 when the contract is signed and\/or registered in the acquirer\u2019s name, not when full and final payment of the purchase price occurs.<\/p>\n Certainly, this would be consistent with the CGT provisions (see div 109 of the Income Tax Assessment Act 1997<\/em> (Cth)).<\/p>\n A super fund owns all of the units in a unit trust established in 2006. The unit trust holds real estate.<\/p>\n The fund wishes to reinvest all distributions. Before 1 July 2013 the fund acquires 50,000 units for a market value of $4.10 each, however, the units are partially paid to the extent of $1 each. In 2014, the unit trust needs $45,000 and makes a 90\u00a2 call in respect of all partly paid units.<\/p>\n The fund pays $45,000 (ie, 50,000 x 90\u00a2) and because the fund is not acquiring any new units, no qualified independent valuer is required.\n<\/p><\/div>\n Naturally, for such a course of action to be effective, the documentation implementing it must be effective.<\/p>\n New Kit To Help!<\/em><\/p>\n DBA Lawyers have just launched the Unit Trust Compliance Kit (see below).<\/p>\n This kit provides template documentation to implement partially issued units along with many other helpful templates for popular unit trust transactions.\n<\/p><\/div>\n Naturally care must be taken to ensure the unit trust deed allows for partially issued units and the situation becomes more involved if the SMSF is not the only unitholder.<\/p>\n Similarly, stamp duty and the quantum of distributions in respect of partially paid units should be carefully considered too.<\/p>\n Many Other Kits Too<\/em><\/p>\n DBA Lawyers offers many other kits, ranging from pension kits to wind up kits. For more details visit For further Information please contact:<\/p>\n DBA LAWYERS PTY LTD<\/strong> (ACN 120 513 037) Level 1, 290 Coventry Street, South Melbourne Vic 3205 DBA News contains general information only and is no substitute for expert advice. Further, DBA is not licensed under the Corporations Act 2001<\/em> (Cth) to give financial product advice. We therefore disclaim all liability howsoever arising from reliance on any information herein unless you are a client of DBA that has specifically requested our advice.<\/p>\n<\/div>\nDownload as PDF<\/a><\/span>\n","protected":false},"excerpt":{"rendered":"Who is a \u2018qualified independent valuer\u2019?<\/h3>\n
Does a new accountant need to be engaged each time SMSFs buy units?<\/h3>\n
Is there a more practical solution?<\/h3>\n
\neven if the call occurs after 30 June 2013.<\/p>\nCase study<\/h3>\n
Documenting such an arrangement<\/h3>\n
\nwww.dbalawyers.com.au\/strategy-compliance-kits<\/a>\n<\/div>\n![\"\"](\"http:\/\/www.dbalawyers.com.au\/wp-content\/uploads\/2013\/05\/news-may-2013.jpg\")
<\/p>\n
\nPh 03 9092 9400 Fax 03 9092 9440 dba@dbalawyers.com.au<\/a> www.dbalawyers.com.au<\/a><\/p>\n