The Federal Government has deferred its proposed off-market transfers ban between self managed super funds and related parties until July 1, 2013.
The ban was to come into effect on July 1 this year but, according to the Federal Treasury website, the proposed ban is now planned to take effect from July 1 next year.
The delay has been welcomed by the SMSF Professionals’ Association of Australia, as technical director Peter Burgess told SmartCompany the deferred start date is necessary to give Treasury more time to work out the serious practical issues that threaten to derail the measure.
“There is a problem with what they are proposing. If they ban these transactions off market it means people will have to transfer on market, but the problem is the Corporations Law does not allow someone to sell a share with the intention of buying back on market,” says Burgess.
“We believe that goes way beyond the original intent of the measure.”
“It’s called a wash trade and serious penalties can apply if you breach those provisions. It appears this has been overlooked and this is a reason for the delay; they need to find a solution for it.”
The SPAA continues to advocate tighter legislative controls as a “sensible” alternative to the ban.
“We say there is an alternative, instead of banning off-market transfer they should tighten the legislative requirements so you have to forward the transfer form to the registry in a certain number of days which would help minimise any price manipulation,” says Burgess.
The government’s delay is likely to have been prompted by “intense lobbying” against the ban alongside the concerns about the Corporations Law according to John Randall, SMSF advisory partner at Deloitte Private.
Randall told SmartCompany the delay gave the government some “breathing space” to reconsider the ban.
“The main problem with the off-market transfers was that, in some instances, there was manipulation of the price because there was flexibility about the dates which go on transfer forms, particularly for share registers,” he says.
“As with anything, people take advantage of those sort of things, particularly with stock market volatility at the moment. It is that manipulation that has caused these concerns about off-market transfers.”
Randall says one compromise may be to have a time restriction on when off-market transfers can happen.
“Really it is a matter of trustees having honesty and integrity and not manipulating these dates. If they do off-market transfers they need to be careful they are doing it properly, as the tax office is certainly aware of these issues,” says Randall.
“While there is this window perhaps for another year, people need to make sure they do everything correctly because they will be watched.”
Randall says the constant change surrounding SMSF regulation is “frustrating” for SMSF trustees and their advisers.
“It can be very disheartening for people who go in with a plan, particularly in the lead up to June 30 people may have been scrambling to get their shares into their SMSF before then,” he says.
“The communication or lack of it is certainly an issue for a lot of trustees, most of them are trying to do the right thing.”