Hello friends, the "P" SMSF had 3 members since before 2007, being Mom and two adult boys.
2007 Mom transferred in specie a commercial property into the fund as a credit to her a/c. Property title transferred to corporate trustee of the fund.
2013 Mom died, her will effectively bequeathing estate to the boys equally. No bene nominations in the fund. The estate has not been wound up yet today.
2021 Mom's name, styled as the estate, has continued as a member of the fund along with the boys, so it still has 3 member accounts. The property continues to be leased out and rents and expenses formed part of the SMSF since 2007. The boys are still 10 years below preservation age. They have negligible balances in the fund and Mom's balance exceeds the value of the property. Mom's balance is 100% tax free component.
I have two questions, given that the parties have obtained the appropriate financial planning advice
1. Do you see anything preventing the wind up of the "P" SMSF by paying out a lump sum in specie of the property to Mom's estate, plus cash for the rest of her balance ? Being tax free element, the lump sum is not assessable, no PAYGPS required. Then the estate can then distribute the property to the boys by transfer of title from the corporate trustee to their joint names. As it is corpus of the estate it is not assessable to the beneficiaries. The boys would roll over their SMSF account balances to their respective other super funds and the "P" SMSF can be wound up. The trust deed has no clauses that prevent this payout.
2. Given (1), has a CGT event been triggered ? If so, what is the consideration and cost base ? If not, how is the CGT cost base of the property determined for the boys direct interests ? I thought that CGT event E2 would not apply as deceased estates are exempt.
Hi Peter
To summarise, mum transferred a property to the SMSF in 2007, she died in 2013. Her balance was / is 100% tax free. Her benefits are to be paid to 2 adult children
I agree the SMSF should be able to transfer the property to the estate and on the basis that her balance is 100% tax free the estate and then the boys would receive the assets tax free. The children can rollover their SMSF balances to another Fund and the SMSF can be wound up.
As the property has been transferred out of the Fund a CGT event has occurred as there has been a disposal of an asset. The consideration would be the current value of the property and the cost base would be as recorded in the accounts of the Fund. The cost base to the children should be the sale value of the property.
Given the issues you have raised the trustees of the Fund should seek professional advice. The issues as I see them include: