What Is an In-Specie Transfer?

An asset transfer is a process of transferring something of value (such as managed investments or listed securities) from one person or place to another. You may be considering moving an investment or asset between different structures of ownership. For example, you can move certain assets from a personal capacity into a trust. In this process, the asset or investment can be sold down to cash, with the proceeds transferred between parties. Alternatively, the transfer can be made in-specie. This article explains what an in-specie transfer is and its benefits. 

Understanding In-Specie Transfers

An in-specie transfer is the process of transferring assets without selling the underlying investment. This process is often used in transferring managed funds or shares. ‘In-specie’ is a Latin phrase meaning ‘in its actual form.’ Therefore, a transfer made ‘in-specie’ is a transfer of an asset in its present form. Unlike the process of selling an asset and then transferring the cash between parties, an in-specie transfer involves the transfer of an asset without any money changing hands.

Benefits of an In-Specie Transfer

There are several benefits of carrying out an in-specie transfer, including:

• potential savings on buy and sell costs, for example, avoiding the fees associated with the involvement of listing an asset or engaging an agent; 
• preventing risks related to selling and repurchasing investments in the market, for example, performing an in-specie transfer of shares prevents them from being sold at a low point in market fluctuations;
• being able to remain invested in the market throughout the transfer; and
• potential savings on capital gains tax (CGT) if there is no change in beneficial ownership.

Superannuation and In-Specie Transfers

You can also make in-specie transfers to your superannuation fund. This transfer is in addition to the conventional contributions that you make to your superannuation. In-specie transfers into your superannuation fund involve the transfer of an asset into your fund without it first being liquidated into cash. Whilst it is possible to make this kind of transfer to retail and industry super funds, it is more commonly relevant to self managed super funds (SMSFs). For example, an SMSF member in a high marginal tax bracket may consider undertaking an in-specie transfer to shift an asset into a superannuation fund for, among other reasons, favourable tax treatment. 

There are special rules concerning the in-specie movement of assets in the context of superannuation. For taxation purposes, a trustee cannot acquire an asset from a related party. There are a few exceptions, including:

• listed securities; 
• business real property; 
• units in widely held unit trusts; and 
• in-house assets within the prescribed limits. 

While you do not sell the asset down to cash, an in-specie transfer will generally trigger a capital gains tax event, as you transfer the ownership.

Transferring an Asset Into an SMSF

Currently, the only assets you can transfer into a SMSF from a member are as follows:

• ASX listed securities;
• widely held managed funds;
• business or commercial property; and
• cash-based investments, such as bonds and debentures.

When making an in-specie transfer to a SMSF, different processes may be required. This will depend on the type of asset in question, for instance:

• when transferring an ASX listed security, you must lodge an Off Market Transfer Form; or.
• when transferring a commercial property, you must execute a contract for sale. 

Transferring an asset to your SMSF can result in possible tax efficiencies and CGT savings. However, it is essential to understand that once you transfer an asset to an SMSF, you cannot withdraw the asset until you reach retirement age. With this in mind, it is crucial to be sure that you will not need to access your assets before proceeding with an in-specie transfer.

As well as this, transferring real property often attracts sizeable stamp duty. Accordingly, it is crucial to think carefully before deciding to transfer any assets to your SMSF.

Transferring an Asset Out of a SMSF

You can move your assets out of your SMSF through an in-specie transfer once you reach retirement age. Alternatively, you can make an in-specie transfer if you have met other superannuation conditions of release. As above, you must facilitate the transfer of an ASX listed security through an Off Market Transfer Form; you must execute the transfer of commercial property through a contract for sale.

Key Takeaways

An asset transfer will depend on third parties such as share registries, broking institutions, fund managers and government departments such as the Office of State Revenue. If you require assistance with your company’s asset transfer, contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.