The letters sent by the ATO to SMSFs with a high concentration to a single asset or asset class were a “brutal” approach to compliance, but have highlighted the value of advice, an SMSF expert has claimed.
Lightyear Docs founder and I Love SMSF chief executive Grant Abbott said: “The letters are pretty brutal and in all my years in SMSFs and tax I have never seen a letter like this. The worst thing is they were sent to clients and auditors and not accountants and administrators.”
Abbott made the comment as part of a Lightyear Docs roadshow event in Sydney late last week, adding the letters had both a good and a bad side to them.
“The bad side is the ATO said it would be collating the results and checking when the audit reports come in and seeing what happens in terms of contravention notices,” he said.
“If this is a successful strategy, the ATO commissioner will note there is 190,000 SMSFs with 90 per cent of their investments in a single asset class, including business real property, cash, which could be the next target, but if he sees compliance issues, he can just go into a database and flip these letters out.”
He added the good side was the awareness being raised about investment strategies and SMSF advisers should make use of that.
“Getting a letter like that from the ATO is putting pressure on trustees and that is the good thing,” he noted.
“It is opening the door for trustees to understand they are responsible and to see the value of the work we are doing for them. To date it has not been properly valued, but now we can point to the ATO being aggressive and highlight what are the potential issues for an SMSF.”
He also noted a recent release from ASIC regarding the time taken to manage an SMSF inadvertently promoted the value of SMSF advice.
Referring to the 100-plus hours stated by the corporate regulator as being required to run a fund, he called the figure into doubt and questioned how many funds required that amount of time.
“How many funds spend 100 hours running a fund? We can take this number as a good thing and can flip this around and say ‘ASIC states you should be using an adviser because that way you will spend less hours and come in much cheaper’,” he said.
