I have a SMSF to which I am the sole member under a corporate trustee arrangement. The Fund has been running in pension mode now for a few years and on commencing my pension the taxable and non-taxable proportions were determined and laid out in my Actuary Certificate.
Over the years I have made quite a large capital gain on the value of my investments and a mate tells me that on my death that the taxable and non-taxable amounts are re-evaluated and the unrealised capital gain amount is calculated and added to the taxable component of the Fund.
Therefore on my death under a Binding Death Benefit Nomination the beneficiary if not a sole dependant will have to pay tax on this taxable proportion. I have just turned 60 and see that it would be wise to reduce this taxable component within the fund by considering the Re-contribution Strategy.
As the capital gain is unrealised and with only a small cash holding within the Fund, this would mean that I would have to sell down a parcel of my stocks to effectively participate in this strategy.
I have been trying to get my head around the process and steps involved in doing this and if there are any considerations that need to be addressed in undertaking this strategy.
Is it as easy as selecting and selling down a parcell of stocks, then as the money becomes instantly available in the Funds broking account, buy back in immediately replacing what I have just sold.
Or, as I have a separate Administration account to my Broking account do the proceeds from the sale have to be transferred from my Broking account back to my SMSF Administration account, then transferred back into my Broking account to repurchase and replace the stocks sold.
This process may take up to 7 days to complete and I can see that it comes with dangers of taking a loss due to the buyback price possibly being higher.
I realise there would have to be minutes drawn up covering this re-contribution Strategy and would like some advice on what the steps are and the possible considerations that I should be looking at.
