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SPAA welcomes decision to defer off-market transfer ban

16 Jul 2012
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The SMSF Professionals’ Association of Australia (SPAA) welcomes the Federal Government’s decision to defer the proposed ban on off-market transfers between SMSFs and related parties where a market exists.

According to the Federal Treasury website, the proposed ban is now planned to take effect from 1 July 2013. SPAA Technical Director Peter Burgess says the decision to defer the start date is necessary to give Treasury more time to work out a number of serious practical issues that threaten to de-rail the measure.

Burgess, who will address this critical issue for SMSFs at SPAA’s technical conference in Sydney on 24 July, says it is the association’s understanding that the Government’s intention  was to enforce a ban on these transactions by amending subsection 66(2) of the Superannuation Industry (Supervision) Act 1993 (the SIS Act).

“This is the section of the Act that allows fund trustees to acquire listed securities from a related party without breaching the general prohibition on acquiring assets from a related party.

“For SMSFs, the amendment would most likely restrict the exemption available under section 66(2) to listed securities acquired from a related party on-market.

“However, the problem with this approach is that the Corporations Act prohibits investors from selling securities on market with the intention of buying back that security on market – sometimes referred to as a wash trade.

“This is why the transaction is done off-market. If it is done on-market SMSF investors and market participants may face serious penalties for breaching the market integrity rules under the Corporations Act.

“These rules are there to prevent market rigging and the false or misleading appearance of active trading of a security, which clearly is not the intention or motive of an SMSF investor.”

Unless this issue is resolved, banning off-market transfers will have the effect of banning SMSF investors from transferring any listed securities they own to their fund that goes well beyond what was proposed and intended by the Cooper Review, he says. SPAA continues to advocate tighter legislative controls as an alternative to the ban.

This approach would see prescribed timeframes and pricing rules inserted into the law for off-market transfers and a requirement for the fund auditor to confirm that these rules had been adhered to.

16 July2012

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