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ATO Urges SMSF Users To Be Wary Of Tax Schemes

by Mary Swire,, Hong Kong

29 November 2017

The Australian Taxation Office (ATO) has launched Project Super Scheme Smart, a new campaign that warns self-managed super fund (SMSF) members to be aware of the dangers of illegal tax schemes.

The ATO said that it is currently seeing a number of tax schemes targeting Australians planning for their retirement. It explained that there are arrangements directed towards minimizing or avoiding tax, designed to help individuals or other related entities to minimize their tax bill by channelling money inappropriately through SMSFs.

The campaign is intended to educate taxpayers and their advisers about these types of schemes, so that they know what to look out for. The ATO has created videos and provided a phone number for taxpayers who have been approached by a promoter or been involved in a scheme.

According to the ATO, these arrangements are often structured so that they appear to satisfy regulatory rules while minimizing tax or even providing a tax refund.

The ATO warned that there are substantial penalties for those involved in deliberate tax avoidance schemes and that an individual could lose their right to be a trustee of their own superannuation fund, or in some cases risk going to jail. It added that the promoters of such schemes are also on its "watch list."

The ATO explained that the schemes have common features, and that they typically:

  • are artificially contrived with complex structures, usually connecting with an existing or newly created SMSF;
  • involve a significant amount of paper shuffling;
  • are designed to give the taxpayer minimal or zero tax, or even a tax refund; and
  • aim to give a present day tax benefit by adopting the arrangement.

The ATO's website provides further information on the details of the schemes concerned. Broadly, these include:

  • Refunds of excess non-concessional contributions to reduce the taxable components of superannuation account balances;
  • The granting of legal life interest over commercial property to SMSFs;
  • Dividend stripping;
  • Non-arm's length limited recourse borrowing arrangements;
  • Personal services income;
  • The deliberate use of multiple SMSFs to manipulate tax outcomes;
  • The use of reserves to circumvent the restrictions and limits which apply as a result of the total super balance and transfer balance cap measures; and
  • Certain arrangements involving SMSFs and related-party property development ventures.

TAGS: individuals | compliance | tax | pensions | tax compliance | tax avoidance | revenue guidance | retirement | Australia | tax authority | penalties | services

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