Property spruikers are targeting the retirement savings of SMSF trustees struggling to enter the housing market by promoting the purchase of property through an SMSF and advisers must act to discourage this behaviour, according to the ATO.
ATO SMSF segment acting assistant commissioner Tara McLachlan told the SMSF Association Technical Day Series in Sydney today that property spruikers are targeting retirees for the purchase of property through a complicated limited recourse borrowing arrangement with no regard to the size of the SMSF or its ability to grow its retirement balance.
“[These] schemes we see pull on the heartstrings of average Australians struggling to get into the housing market,” McLachlan said.
“I think we can all agree that we don’t want to see these kinds of activities flourish or be ignored.”
She added professionals such as financial advisers and accountants are the “eyes and ears” of the ATO, and said the tax office is eager to work with them to ensure this kind of behaviour is discouraged and penalised where appropriate.
McLachlan also warned despite the recent decision by the full Federal Court to overturn an earlier decision by a judge in the case of Aussiegolfa Pty Ltd vs Commissioner of Taxation, SMSFs still need to ensure their investment decisions are for the sole purpose of providing retirement benefits.
“Investments that provide current-day benefits to members or related parties may contravene the sole purpose test,” she said.
The full Federal Court handed down a favourable decision on the leasing to a related party of a property held in a sub-fund where an SMSF is the owner of units in the sub-fund.
The decision comes after Aussiegolfa as SMSF trustee of the Benson Family Super Fund appealed an earlier Federal Court ruling that declared the fund had breached the sole purpose test because it had leased a property partly owned by the SMSF via a sub-fund of a managed fund to the daughter of the SMSF trustee’s sole director, Mr Benson.
“As you’ll appreciate the decision was only made last Friday so we’re still considering the decision and consequences,” McLachlan said.
“I think it’s still fair to say the sole purpose test will remain an important consideration for trustees and their advisers.”
