Accounting, Administration, Contributions, fraud, SMSF, SMSFA

Fraud raises compliance snags

SMSF fraud compliance contributions

The regulator’s stance regarding situations where benefits of a fund have been accessed via fraudulent activities remains a little unclear.

The compliance treatment for money which exits an SMSF through instances of fraud continues to be unclear among experts in the sector.

To this end two particular scenarios are being examined by industry heads, one being whether monies taken from an SMSF through fraudulent activity will be treated as illegal early access of benefits.

SMSF Association chief executive Peter Burgess suggested indications are the ATO would not apply a blanket approach to the issue.

“I would like to think if it is a fraud case, and the trustees had no knowledge of it, then the ATO wouldn’t consider that to be a breach of the SIS (Superannuation Industry Superannuation) Regulations,” Burgess told delegates at the recent ASF Audits Technical Seminar 2023 in Adelaide.

“We have seen some draft information come out around illegal early access and [the ATO] has talked about that and the circumstances will depend on how much control the trustees have over the release of those funds,” he noted.

ASF Audits head of education Shelley Banton pointed out relevant documentation will be a significant determining factor as well.

“If you’re going to play the ‘I got scammed’ card you’d be wanting to have a [substantial amount] of documentation to back that up and a paper trail from your bank and emails from trustees [showing efforts] to try and recover monies [taken out of the SMSF by fraudulent activities],” Banton said.

The second issue creating some uncertainty is how to treat monies recouped from fraudulent schemes that trustees have tried to allocate back to the SMSF.

“Would that be a contribution or would it not be? I suspect it would be. I can’t see how you could get [the amount] back [into the SMSF] without it being counted against the member’s contributions cap,” Burgess predicted.

According to Banton the sector may already have an answer on the ATO’s approach to this matter.

“The ATO has said [in a Law Administration Practice Statement introduced earlier this year] if you take money out illegally and haven’t met a condition of release, and it is put back [into the fund], it’s actually a contribution and it’s not a rectification,” she revealed.

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital