What is an “in Specie Transfer”?

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In specie transfers are quite difficult to comprehend if you have no prior knowledge of shares or the transfer of assets. This blog post will provide you with all the information you need to know about engaging with in-specie transfers. 

What is an ‘in specie transfer’?

In specie transfers are transfers of assets in and out of super funds without the need to convert them into cash. The assets are transferred without selling the underlying investment, and the asset is transferred without any money being exchanged. This is helpful when cash is not readily available, or when it is simply more practical to hand over the asset in its entirety instead of liquidating it. In-specie transfers are also known as off-market transfers, and In specie means ‘in actual form’ in Latin. 

What assets can be considered in specie shares?

There are only four types of assets that can be transferred under Australian superannuation law in-specie, including:

  • Australian Securities Exchange listed securities
  • Cash based investments such as bonds and debentures
  • Commercial or business property
  • Managed funds

What are the benefits of an in-specie transfer?

Benefits of in specie transfers include:

  • The potential tax savings that accompany it
  • Reduced risks related to selling and repurchasing investments in the market
  • Potential savings on buy and sell costs
  • Being able to remain invested in the market throughout the transfer

How do in specie transfers work?

In specie transfers are transferred from one provider to another without the need to sell and re-purchase the asset. Assets are generally transferred via self managed super funds, however, they must be at market value. In specie transfers can be made in or out of a self managed super fund, in addition to the contributions that your employer makes on your behalf. A transfer into your super fund does not need to be liquidated into cash. 

Making an in species transfer into a self managed super fund can be completed by a member of the fund by either:

  • Completing and lodging an off-market transfer form for the transfer of AEX listed securities
  • Or executing a contract of sale for commercial property transfers

Transferring an in specie share or asset out of a self managed superfund normally occurs once you reach retirement age and your investment is wound up, and is paid in a lump sum to the member via an off-market transfer form or commercial property contract. 

How long does an in specie transfer take?

The processing time for an in specie transfer can take anywhere from a week to three months. 

What is a capital gain and do in specie transfers trigger it?

Capital gains tax is defined by the Australian Taxation Office (ATO) as the tax you pay from selling assets such as property or shares. You must report these capital gains in your income tax return, which will subsequently increase the tax you must pay on this gain. An in-specie transfer will normally trigger a capital gains event due to a transfer of the assets ownership, despite not selling the asset down to cash. 

If you require further assistance with any information related to in-specie transfer, you should seek legal advice. Legal Kitz can assist with ensuring that your concerns are addressed, and can provide you with advice that is tailored to your situation. You can book a free 30-minute consultation via our website now.

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