An ATO decision to extend the timeframe for cancelling an Australian business number (ABN) has addressed one of the most common problems trustees experience when winding up an SMSF, according to a technical specialist.
Smarter SMSF technical and education manager Tim Miller acknowledged the introduction of the requirement to use SuperStream had created a specific administrative hurdle for trustees and practitioners when rolling over entitlements from a fund.
“We came across issues where the tax office had cancelled the Australian business number, so we’d actually lodged the final return for the fund and the ATO had cancelled the ABN within 14 days,” Miller told attendees of a SuperGuardian webinar held today.
“Often within that 14-day period, the refund had come back from the ATO for the final return, but there was an inability to actually process the SuperStream rollover because the ABN had been cancelled.
“You couldn’t go through the process. There could be no verification [because] the fund wasn’t on the look-up system and so Australian Prudential Regulation Authority-regulated funds weren’t able to accept the money.”
He said he had approached the ATO for guidance to support clients who might be caught in this situation.
“That led us down the path of communicating with the tax office about what the options were [in this case]. The primary position that they came back with was that you had to apply for specific fund advice to get a resolution from the ATO, which seemed an illogical approach,” he said.
“They could, in certain circumstances, reinstate the ABN, but that was then going to delay the rollover process even longer.
“We eventually saw the tax office expanding the cancellation window of the ABN from 14 days to 28 days, which ultimately gives funds more time to be able to finalise that last rollover.”
Additionally, he highlighted the proposed Division 296 tax as something that could lead trustees to increasingly consult SMSF advisers for help with closing down a fund.
“I did a roadshow throughout March [and] we posed the question to attendees: how many of your SMSF clients have indicated that they may consider winding up their self-managed superannuation fund because of the introduction of Division 296 and the additional 15 per cent tax?” he noted.
“I was actually quite staggered to see how many people were contemplating it. Certainly from an advice point of view, we really need to be clear to people what the taxation outcome is going to be by retaining money in super versus pulling that money out of super.
“We don’t want people to jump the gun unnecessarily and wind up superannuation funds too early, because once a wind-up is done, it can’t be undone.”