Move assets into super and save tax

There are a number of advantages to running a self managed super fund (SMSF), particularly if you wish to have greater flexibility over the choice of investments. Not only can you (along with any other Trustees) control the investment strategy – and invest in a range of direct shares and managed funds - you also retain control over when the assets are bought and sold. That means you can take advantage of share market floats and also manage the tax liabilities of the fund.

A further benefit of having a SMSF, is that the fund may be able to accept 'in specie' contributions from members. An "in specie' contribution is where you transfer the ownership of certain types of assets, held in your own name into your self managed superannuation fund. By doing this you can take advantage of the lower tax rate applying to fund earnings.

How does the strategy work?

If you own an asset outside of super, you pay tax on any investment earnings at your marginal tax rate (which could be as high as 48.5). By transferring ownership of the asset to your super fund, you can take advantage of the lower tax rates that apply to investment earnings (i.e. a maximum rate of 15%).

It should be noted that any change in ownership of an asset will generally result in capital gains tax (CGT) being payable (although this would also be payable if the asset were sold and the proceeds contributed to super). However, it may be possible for some investors to claim a tax deduction on the contribution to offset any CGT payable.

While the 'in specie' contribution will be subject to preservation, if you intend to use the investment to fund your retirement, it may be more tax-effective to hold the asset in the superannuation environment rather than hold it as an ordinary asset.

The Benefits

• By contributing an asset you hold in your own name into a super fund, you can reduce the tax payable on investment earnings. This can significantly increase the after-tax benefit available for retirement.