What you need to know before moving your shares into your super

Cash isn’t the only way to contribute to your super, but there are critical details you’ll want to keep in mind before you start messing with in-specie contributions.

Moving your share portfolio into your super can be a way to bolster your superannuation before retirement, but there are a few things you’ll want to know before you do so.

A senior financial planner at Creation Wealth, Andrew Zbik said that investors who are nearing retirement might have taken advantage of the market volatility of the COVID-19 pandemic.

If they did, then moving those shares into their superannuation fund via an “in-specie” contribution might make sense.

Mr Zbik explained that the advantages of moving your shares into your super fund are largely tax-based.

By holding shares within a superannuation environment, you’re able to take advantage of a lower tax rate than you would otherwise. The benefits of doing so are then compounded by the fact that most superannuants are able to draw an account-based pension from their superannuation fund tax-free.

Still, if you are considering moving your shares into your super via an in-specie contribution, there are a some pretty significant terms and conditions you’ll want to keep in mind.

Firstly, transferring your shares from your own name to your super 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.

On the other hand, if you are transferring the shares at a loss, you’ll be able to retain that loss on your next tax return, using it to offset future capital gains.

For some, 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.

Investors who go forward with transferring their shares into their super will need to report the value of their shares on the day and notify the share registry report of the transfer within 28 days.

They’ll also want to keep in mind that transferring shares into superannuation will most likely count towards their non-concessional contribution cap.

This is usually $110,000 per financial year, though it can be stretched to $330,000 if you are aged under 67 and opt to bring forward three years of contributions.

Even then, transferring your share portfolio into your super isn’t something that you should do lightly. It’s not necessarily going to be a strategy that makes sense for every investor.

One would only use this strategy if they anticipate to continue holding these shares for the long term.

Depending on your current super fund, it might not even be an option at all.

It is noted that while most SMSFs can make use of this strategy, many industry and retail funds are not currently able to receive in-specie contributions from members. 

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.

CPA’s general manager for external affairs, Dr Jane Rennie, said that there may be other financial advantages to contributing shares to super.

You may be able to avoid paying brokerage and your shares will remain in the stock market. However, if you’re under the preservation age, your ability to access the shares will be limited once they’re in your super fund.

We can help you to maximize your wealth and manage your finances accordingly. Our team is here. Call us at 08 8231 4709 or you can also reach us at info@centrawealth.com.au

Article reproduced from nestegg

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Zac Zacharia (Managing Director) has been assisting clients to create wealth and secure their futures for over 14 years.

He is also an accomplished presenter and educator

Co-authoring the popular investment book, Property vs Shares.