In a recent case of Nifuno Pty Ltd atf Stephen Forbes Pension Fund v Chief Commissioner of State Revenue  NSWCATOD 3, the NSW Civil and Administrative Tribunal (NCAT) considered the application of an available duty concession for the transfer of property in connection with persons changing superannuation funds, including self-managed superannuation funds (SMSFs).
In this matter, there was a member of a first SMSF (Fund 1), which had been in existence for more than 20 years which held a NSW property as one of its assets. In Fund 1, the member had both an accumulation account and pension account.
Due to the introduction of the new transfer balance cap rules, the member moved all his benefits in his pension account to a second SMSF (Fund 2), with his accumulation account remaining in Fund 1. As part of this process, assets equal to the pension account (including the property) were transferred from the trustee of Fund 1 to the trustee of Fund 2.
The NCAT considered the application of a duty concession under section 61 of the Duties Act 1997 (NSW) for the transfer of the property between the super funds, which is similar to matching duty exemptions or concessions in other states such as Victoria, Tasmania, Western Australia, South Australia and the Australian Capital Territory.
The Tribunal disagreed with the NSW Commissioner of State Revenue’s interpretation of section 61 – which was that all benefits of the member in Fund 1 (including in the accumulation account) needed to be transferred out of Fund 1 in order for a duty concession to apply to the transfer of the property.
The Commissioner’s interpretation of the provisions was found to be ‘a narrow, pedantic approach’ and ultimately the Tribunal found that according to a purposive approach to statutory interpretation, the duty concession under section 61 should apply where a relevant transfer occurs in connection with a cessation of entitlement to part of the benefits from a fund. Here, NCAT pointed to the fact that the member ceased to be entitled to pension benefits in Fund 1.
Whilst this case serves as a current win to taxpayers (it is still subject to potential appeal), caution should be taken before effecting a similar arrangement as the NCAT decision is contrary to the view of revenue authorities and is likely to be distinguished, ignored (as non-binding) or challenged by such revenue authorities. Therefore, it would generally still be recommended that any transfers of land between SMSFs be effected on the basis that a member is ceasing to hold all benefits in the transferor SMSF.
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