The ATO has called on SMSF trustees and advisers to help identify retirement planning schemes that engage in deliberate tax avoidance, saying it was seeing a number of the schemes in operation and was maintaining a watch list of scheme promoters.
In an update on its website, the regulator stated: “We are seeing a number of schemes targeting Australians planning for their retirement. These schemes encourage individuals to channel money inappropriately through their SMSF.”
The ATO listed a number of common features of the retirement schemes, which included the presence of contrived and complex structures around a new or existing SMSF, unnecessary transactions, outcomes designed to create minimal or zero tax or a tax refund, and the aim of bringing forward a tax benefit.
It also listed the types of schemes that had attracted its attention, adding it was “concerned” about the presence of the following:
- related-party property developments that can lead to the application of the non-arm’s-length income provisions and breaches of related-party transaction regulations,
- non-concessional cap manipulation where the cap is exceeded with the aim of manipulating the taxable and non-taxable components of an account balance,
- granting legal life interest over commercial property to an SMSF by a fund member so rental income is taxed at a lower rate, but without full ownership of the property transferring to the SMSF,
- dividend stripping through the transfer of shares from a private company to a related SMSF so the company can pay franked dividends to the SMSF and also tax-free profits,
- limited recourse borrowing arrangements that are not consistent with a genuine arm’s-length dealing,
- the diversion of personal services income to an SMSF so it is concessionally taxed or treated as exempt from tax,
- improper use of multiple SMSFs to manipulate tax outcomes, and
- inappropriate use of reserves, particularly in structures designed to bypass super balance and transfer balance cap measures.
As part of its efforts to tackle these schemes, the ATO stated it had launched Project Super Scheme Smart, which aimed to provide information to consumers about avoiding the schemes and seeking assistance if they believed they may have entered into one of them, as well as providing information to financial advisers to assist their clients in this area.
Addressing individuals and trustees, it said: “We are here to help you. If you think you’ve been approached by a promoter or caught up in a scheme, please contact us early and we will work with you towards a resolution.”
In a separate statement directed to financial advisers who may have been approached by a retirement scheme promoter, the ATO highlighted they should question the legitimacy of the scheme and report it to the regulator.
“We are encouraging all advisers in wealth management and retirement planning to think carefully about whether the retirement planning scheme is tax and regulatory compliant. Seek a second opinion from a professional colleague or another trusted practising expert if you think you have been approached by a promoter or inadvertently involved a client in a scheme,” it said.
Individuals and advisers were also encouraged to report the schemes to the ATO using the regulator’s ‘tip-off’ service.
