The Australian Tax Office (ATO) has indicated that self-managed super fund (SMSF) trustees suspected of using their funds to dodge personal tax obligations are about to come under closer scrutiny.
ATO Director of SMSF Risks and Products, Nathan Burgess, told a conference in October that key targets of the crackdown would be investors allegedly not using their SMSF for its intended purpose, but rather to avoid paying personal tax or to boost the balance of their estate.
The sole purpose test legislated by the ATO states that SMSFs must be maintained “for… providing retirement benefits to members, or to their dependants if a member dies before retirement4.”
On trustees avoiding tax, Burgess said “[these] are people who are running an SMSF, but we’re not confident it’s actually about retirement. We feel that it’s about avoiding taxation in their company or trust right now5.”
The two areas that will be closely monitored are: large transfers of funds to overseas accounts or investments; and dividend stripping, which involves the transfer of shares in a related private company with retained profits and franking credits to a SMSF6.
The ATO are planning the launch of a voluntary disclosure framework for SMSF trustees who have broken the rules. This will allow trustees to receive reduced penalties in return for admitting their transgressions.
If you have a SMSF, consult a professional adviser to ensure you are meeting all your obligations.
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