The SMSF Association has made practitioners aware of the ramifications for them in recent changes to the law that have given the ATO more power to act against promoters of illegal early release (IER) schemes regarding superannuation.
SMSF Association head of technical Mary Simmons pointed out the ATO had strengthened and clarified its powers to act against IER schemes in the latest update of Practice Statement Law Administration (PS LA) 2021/1.
“This update lays out the playbook for ATO officers to identify and penalise those promoting IER schemes, emphasising that the ATO will not tolerate any attempts to withdraw superannuation benefits in breach of the superannuation laws,” Simmons noted in her most recent blog post.
“The updated PS LA 2021/1 underscores the ATO’s powers under section 68B of the Superannuation Industry (Supervision) (SIS) Act 1993, which targets the promotion of schemes that are ‘likely to result’ in the unlawful release of super funds.
“The crux of the matter lies in the term ‘likely to result’, which provides the ATO with the very broad powers to crack down on activities that might lead to the illegal release of superannuation benefits, even if no withdrawal has been made.
“This means that merely setting the stage for a potential breach is enough to land someone in hot water.”
She recognised the expansion of the regulator’s powers with regard to IER schemes stemmed from an amendment to the definition of ‘promoter’ under division 290 of the Taxation Administration Act 1953, triggered by the PwC tax scandal.
To this end, the ATO previously had to prove a promoter received some form of ‘consideration’ for an individual to fit the definition, but the amended division now means a person can be classified as a promoter of a tax scheme if they receive any form of ‘benefit’ from it.
“This is a big deal because it significantly lowers the bar for what the ATO needs to prove, making it easier for the commissioner to act against those promoting illegal schemes, including IER schemes,” Simmons said.
With regard to the operation of tax agents, financial planners, accountants and legal practitioners servicing SMSF clients, she acknowledged in the current version of the Taxation Administration Act 1953, providing advice, even if it is pertaining to a scheme, does not make the practitioner a promoter.
“But, and this is a big but, the line between giving advice and promoting a scheme appears to be getting thinner,” she warned.
“The ATO’s recent updates show they mean business when it comes to IER schemes. As an SMSF professional, it’s important that you report promoters of IER schemes you encounter.”
She added the whistleblower protections in the law will apply to anyone reporting an IER scheme promoter to either the ATO or the Tax Practitioners Board.
