Changes to guidance issued by the ATO via its website can be viewed as binding on SMSF practitioners and also offer protection where they rely on it to take specific actions, a legal expert has stated.
DBA Lawyers special counsel Bryce Figot said the ATO had in the past been a “law-making body” via the application of its guidance and could be viewed to act that way with revised guidance to the SMSF sector.
“One important law the ATO made is when if you have an SMSF that has an interest in a LRBA bare trust and you pay off the LRBA, but you leave it in the bare trust, it’s not an in-house asset,” Figot said during a recent briefing.
“The ATO made a special legislative instrument that changed the law in 2014, but what about ATO web pages? Are they law?
“There is a concept called soft law and this abstract from an [Australian National University] academic journal explains it nicely and states: ‘Soft law is a pervasive phenomenon which is highly effective as a means of regulation in Australia … the term soft law refers to domestic, non-legislative instruments which are designed to influence, modify or otherwise affect conduct.’
“That is 100 per cent ATO web pages. They are very much soft law and if you follow them closely and in good faith, they can provide you good protection.”
He gave the example of changes in the ATO’s minimum expectations of auditors over time, pointing out that previously, to meet Superannuation Industry (Supervision) Regulation 13.14 where auditors should obtain evidence trustees had not given a charge over assets, that could be done via a trustee representation letter and a title search was only required if the auditors suspected there was a charge over the asset.
“Originally the ATO said the trustee representation letter was fine unless you think you’re being lied to, then they changed it and their guidance said the auditor should obtain evidence there is no charge via written confirmation and by carrying out a title search, but it didn’t say to do that annually,” he said.
“Now the guidance says check trustees have not given a charge over or in relation to a fund asset by taking written representations from the trustees and annual title searches.
“Those are big changes. The law itself did not change, but the web pages have changed, the soft law changed, so you’ve got to keep a really close eye on what ATO expectations say.”
