This article by Cameron Micallef was published in NestEgg on 27th August 2021

With record-low interest rates, retirees may not be able to live off their savings and instead may need to consider investing in the stock market, an industry expert has revealed.

While market volatility remains, especially with the COVID-19 pandemic, it is creating a small opportunity for those who are retiring in the next five years.

According to Creation Wealth’s senior financial planner, Andrew Zbik, despite investors feeling unnerved about the current market, older Australians could consider investing their super in shares.

He noted it is possible to contribute your shares, in what is called an ‘in-specie’ contribution, to your SMSF or superannuation fund. That’s right, not all contributions to superannuation need only be cash.

“The benefits of this strategy are that you can continue to hold your shares and move the ownership of that holding into the superannuation environment, which has a lower tax rate compared to many investors’ marginal tax rate,” Mr Zbik said.

“Plus, if the shares are being transferred at a price lower than what you paid for, then there will be no capital gains tax payable.”

5 things to consider before taking on this strategy:

While Mr Zbik noted that investors who take on this approach could end up with a more comfortable retirement, he highlighted the potential risks associated with taking this path.

These include:

1. Making an in-specie transfer of shares from your own name to your superannuation fund is a capital gains event. This means that if you are transferring the shares at a higher value than what you purchased them, you may need to pay capital gains tax, although if it is loss, you can offset this through your tax return.

2. You must choose a date that the transfer is to take place, properly report the true value of the share on that day as your sale/purchase price and the share registry must be notified of this transfer within 28 days.

3. Transferring shares into superannuation will most likely count towards your non-concessional contribution cap, which is currently $110,000 for this financial year or $330,000 if you bring forward three years of contributions and you are aged under 67.

4. Ultimately, one would only use this strategy if they anticipate to continue holding these shares for the long term.

5. Most members of SMSFs will be able to use this strategy. Some retail superannuation funds will accept shares as an in-specie contribution. Unfortunately, most industry funds are not able to receive in-specie contributions of shares yet, but several are investigating this as an option in the future.