The last twelve months have not been the nicest to share investors. The Australian All Ordinaries is down 5.1%. Finance sector stocks are down around 7.2%. Metals and mining sector stocks are down on average 19.2% for the year.
However, this may present a smart opportunity for investors nearing retirement in the next five years.
It is possible to contribute your shares in what is called an ‘in-specie’ contribution to your superannuation fund. That’s right, not all contributions to superannuation need only be cash.
The benefits of this strategy is that you can continue to hold your shares and move the ownership of that holding into the superannuation environment which has a lower tax rate compared to many investors marginal tax rate. Plus, if the shares are being transferred at a price lower than what you paid for them there will be no capital gains tax payable.
Regardless of who wins the election on the 2nd July, most superannuants will still be able to draw an account based pension from the superannuation fund tax free.
There are a few things to consider:
- Making an in specie transfer of shares from your own name to your superannuation fund is a capital gains event. This means that if you are transferring the shares at a higher value than what you purchased them you may need to pay capital gains tax. If you are transferring the shares at a loss it means you will retain that loss on your tax return which can be used to offset future capital gains. Given some shares are trading at five year lows, it may be an opportune time to contribute these shares to your superannuation fund to allow future gains to be made in a concessional tax environment that is superannuation.
- You must choose a date that the transfer is to take place, properly report the true value of the share on that day as your sale/purchase price and the share registry must be notified of this transfer within 28 days.
- Transferring shares into superannuation will most likely count towards your non-concessional contribution cap which is currently $180,000 for this financial year or $500,000 if you bring forward three years of contributions. Given the recent changes announced in the budget, one cannot make more than $500,000 in non-concessional contributions dating back from the 1st July 2007.
- Ultimately, one would only use this strategy if they anticipate to continue holding these shares for the long-term.
- Most members of a self-managed superannuation fund will be able to use this strategy. Some retail superannuation funds will accept shares as an in specie contribution. Unfortunately, most industry funds are not able to receive in specie contributions of shares yet but several are investigating this as an option in the future.
Media enquiries:
Andrew Zbik
Senior Financial Planner
Omniwealth
t: (02) 9112 4316
m: 0422 038 253
andrew.zbik@omniwealth.com.au
www.omniwealth.com.au