FAQ: Can I transfer my BHP shares into my SMSF?

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Yes, you are able to transfer your BHP shares into your SMSF as long as they are transferred at market value. Although SMSF trustees are generally prohibited from buying assets from members or related parties; an exception exists where trustees acquire listed securities at market value.

How does my SMSF pay for the shares?

The shares may be transferred into the SMSF by way of a contribution by the member instead of the fund making a payment to the member from the fund’s bank account. In this strategy it’s important to review the contribution rules which include ensuring there are no age test issues (eg a work test requirement exists for members 65 years and older). There are also the annual contribution caps to consider. Alternatively a trustee may wish to make a prompt payment from the fund’s bank account to the member for the purchase of the BHP shares.

Transfer must be at market value

Importantly, the shares must be acquired by the SMSF at market value. With a listed security like BHP, obtaining a current share value is extremely easy since share prices are listed daily. The auditor will review the price used for the transfer of shares to the SMSF as part of the annual audit review.

Other requirements

Moreover, as with all fund investment purchases the purchase of the shares must be allowed for in the fund’s investment strategy.

The basic administrative process to buy listed shares from a fund member is for an off market transfer form to be completed and submitted to the relevant share registry.  Your adviser will be able to assist you with the steps that need to be taken. Care needs to be exercised to ensure that the shares are correctly transferred to the trustee of the fund (as trustee for the super fund). In addition if the fund is to receive dividends into its bank account, it is imperative that the banking details correctly record the super fund’s bank details and not that of the member.

What other assets can I transfer into the fund?

There is a strict list of assets that an SMSF trustee is able to acquire from a member or related party. This includes the following assets transferred at market value:

  • a listed security (including shares, units or bonds listed on an approved stock exchange)
  • business real property [refer to our other FAQ Can my SMSF buy my business premises”]
  • an in-house asset, provided the market value of your fund’s in-house assets does not exceed 5% of the total market value of your fund’s assets (eg shares in a member’s private company)
  • units in a widely held unit trust (eg managed funds)

Other considerations

As you have transferred your BHP shares to your SMSF, this effectively means you have sold your holding such that you will need to consider that capital gains tax may apply in your personal income tax return.

As individual circumstances will differ, we strongly suggest that if you are considering such a transaction, that you seek advice from one of our expert staff at Aquila Super.