Your Scenario:

You work for a company that is listed on the ASX and you have been offered employee share schemes. You wish to vest this ESS interest into your SMSF to better manage tax and asset protection implications.

Question:

Is it an allowable transfer under the SIS Act?

Answer:

Yes, in Section 66(2)(a) provides that for listed securities that can be transferred from related party to SMSF.

Tax Tip:

The key is the securities (ESS or shares) must be listed on a stock exchange at the time of transfer. It will be a potential compliant breach where the companies are private limited, pre IPO or unlisted public companies.

Common Traps:

From an income tax perspective, the receipt of the shares or options by the SMSF or other entity nonetheless remains a potential tax trigger for the individuals who vest these ESS interests into the SMSF. The individual needs to include in their assessable income the amount equal to the market value of the shares or options, less the consideration paid.

The ATO has made it clear when an SMSF acquires shares through an ESS, the difference between the market price and the consideration, that is the discounted amount, will be treated as a contribution towards the fund and subject to usual contributions cap counting.

For the 2022/23, the relevant contributions caps are:

• concessional contributions: $27,500
• Non-concessional contributions: $110,000 p.a. or $330,000 under three-year bring forward provision (conditions apply).

Usual contribution considerations apply, such as a over the age of 74. Contributions may be restricted, depending on the contributor’s total superannuation balance. Any contributions made in excess of the relevant contributions cap may attract tax penalties.

Disclaimer

GW Capital Group Pvt Ltd General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. please seek personal advice prior to acting on this information.