In order to meet the Superannuation Industry Supervision (SIS) Act in-house asset exemption, trustees must assess the status of an asset once it is in the fund, according to a superannuation technical services manager.
This will ensure the contribution to a self-managed superannuation fund (SMSF) regarding a transferred asset from a related party meets the SIS Act, Cavendish Superannuation technical services manager Tim Miller said.
"People are going about it the wrong way. What they need to look at when you're acquiring an asset is not so much the acquisition time but once the asset is in the fund will it satisfy the definition of an in-house asset," Miller said.
Transferring artwork as a contribution to an SMSF was a good example of how the exemption may not be met, according to Miller.
The important aspect of the exercise was how the artwork would be treated once it had been included as an asset in the fund.
"If you had artwork outside of super and knew it was less than 5 per cent of the fund's assets and you wished to transfer it into the fund and then lease it to an art gallery when it is in the fund, it's no longer going to be an in-house asset because it's not an investment or lease arrangement with a related party," Miller said.
In this situation the asset could not be transferred into the fund because it would not meet the criteria that would make it a legitimate superannuation contribution, he said.
Conversely, if the trustee's company leased the artwork back from the SMSF in question and displayed it in its offices, the transfer would satisfy the necessary legal requirements.
"You've got to look through the entire transaction and the future of the transaction to determine whether or not that in-house asset can be transferred to the superannuation fund and that's often a forgotten process," Miller said.
