The New South Wales Civil and Administrative Tribunal (NCAT) recently considered whether a duty concession was applicable to the transfer of property related to a person changing superannuation fund – including self managed superannuation fund (SMSF) in Nifuno Pty Ltd atf Stephen Forbes Pension Fund v Chief Commissioner of State Revenue  NSWCATOD 3 (Forbes).
In Forbes, a member of the first SMSF (SMSF 1), which had been in existence for more than 20 years and held real property in NSW as one of its assets, and the member had both an accumulation account and pension account.
Following the introduction of the new transfer balance cap rules, the member moved all his benefits in his pension account to a second fund (SMSF 2), with his accumulation account remaining in SMSF 1. As part of this process, assets equal to the pension account (including the property) were transferred from the trustee of SMSF 1 to the trustee of SMSF 2.
NCAT considered whether a duty concession under section 61 of the Duties Act 1997 (NSW) would be applicable to the transfer of the real property between the super funds. This section of the Act is similar to matching duty exemptions or concessions in other states such as Victoria, Tasmania, Western Australia, South Australia and the Australian Capital Territory.
NCAT disagreed with the NSW Commissioner of State Revenue’s interpretation of section 61 – which was that all benefits of the member in SMSF 1 (including in the accumulation account) needed to be transferred out of SMSF 1 for a duty concession to apply to the transfer of the real property.
The Commissioner’s interpretation of the provisions was found to be ‘a narrow, pedantic approach’ and ultimately NCAT determined that according to a purposive approach to legislation, the duty concession under section 61 should apply where a relevant transfer of real property occurs in connection with a cessation of entitlement to part of the benefits from a superannuation fund. Here, NCAT pointed to the fact that the member ceased to be entitled to pension benefits in SMSF 1.
While this case appears to be a prima facie win for 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 real property between SMSFs be effected on the basis that a member is ceasing to hold all benefits in the transferor SMSF.
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