The Australian Taxation Office (ATO) is warning self-managed superannuation fund (SMSF) trustees and retirees about the risks of some emerging retirement planning arrangements that they may consider, or be approached about.

ATO Deputy Commissioner James O’Halloran said the ATO knows most people do the right thing and work hard to save for their retirement.

“If a taxpayer becomes involved in any illegal arrangement, even by accident, they may incur severe penalties, jeopardise their retirement savings and risk losing their rights as a trustee to manage their own fund.”

For this reason, today we are releasing further information on these arrangements through our Super Scheme Smart program.

Super Scheme Smart is designed to give taxpayers access to relevant case studies and information packs to ensure they are well-informed about illegal arrangements, explain the significant risks associated with those arrangements, what warning signs to look for and where to go for help.

Mr O’Halloran said, “We are working hard to shut down illegal arrangements quickly, but the best defence for taxpayers and their advisers is to be aware. Promoters of the arrangements may overtly target SMSF trustees and self-funded retirees, including small business owners and those involved in property development with significant assets.”

“The arrangements may be cleverly disguised to look legitimate, involve a lot of paper shuffling and framed as being designed to give a taxpayer a minimal or zero amount of tax or even a tax refund or concession” Mr O’Halloran said.

“Just because an arrangement is structured in a way which appears to satisfy certain regulatory rules does not mean it is legal. Such arrangements can put SMSFs at significant risk of breaching the superannuation regulatory rules as well as the taxation law.”

The ATO has previously raised concerns about dividend stripping arrangements and contrived arrangements involving diversion of personal services income to an SMSF. There are some emerging arrangements the ATO also wants to bring to people’s attention, including:

Artificial arrangements involving SMSFs and related-party property development ventures.
Arrangements where an individual or related entity grants a legal life interest over a commercial property to an SMSF. This results in the rental income from the property being diverted to the SMSF and taxed at lower rates whilst the individual or related entity retains legal ownership of the property.
Arrangements where individuals (including SMSF members) deliberately exceed their non-concessional contributions cap to manipulate the taxable component and non-taxable component of their fund balance upon refund of the excess.
Mr O’Halloran said “Remember, if it looks too good to be true, it usually is.”

If you have information about these arrangements or would like to make a voluntary disclosure, phone 1800 060 062 or email reportataxscheme@ato.gov.au.

After detailed consultation with the self-managed super fund (SMSF) sector, the ATO announced today that its implementation of SMSF event-based reporting from 1 July 2018 will be limited to those SMSFs with members with total superannuation account balances of $1 million or more.

Deputy Commissioner James O’Halloran said that this means that SMSFs whose members’ total superannuation balances are less than $1 million can choose to report events which impact their members’ transfer balances at the same time that the SMSF lodges its SMSF annual return.

“As a result of this approach it is estimated that up to 85% of the SMSF population will not be required to undertake any additional reporting outside of current annual reporting timeframes for the foreseeable future.” Mr O’Halloran said.

“From 1 July 2018 those SMSFs that do have members with total superannuation account balances of $1 million or more will be required to report events impacting members’ transfer balances within 28 days after the end of the quarter in which the event occurs.

“However, it is important to restate that in all cases, regardless of the reporting timeframe that applies, reporting is only required if an event that impacts a member’s transfer balance cap actually occurs – for example, when a SMSF member first starts to receive a pension from their fund.”

Mr O’Halloran said “On 22 August 2017 we issued a public position paper about SMSF event-based reporting. The feedback we received highlighted concerns about the effort and costs that may be associated with the proposed approach.

“The ATO has listened carefully to this feedback, and in considering these concerns we have decided to provide an annual reporting timeframe for SMSFs with members with lower superannuation balances and to allow a quarterly reporting timeframe for other SMSFs.

“The ATO believes that the combination of these approaches sensibly balances administrative ease and efficiency with the increased need for transparency across the superannuation system.”

As part of our normal practice, the ATO will continue to evaluate benefits and risks arising from this change to SMSF event-based reporting. Should further change be considered to this arrangement or a change to the expectations on the broader SMSF sector, this would be the subject of community consultation.

Mr O’Halloran noted that it remains important for all SMSF trustees and members to self-monitor and track events impacting upon their transfer balances on an ongoing basis, as envisaged by the transfer balance cap legislation.

“This is vital to ensure that SMSF members are in the best position to make informed financial decisions in light of the cap. The financial circumstances of individuals and their superannuation balances can change. It is important that SMSF members are aware of their position in relation to the transfer balance cap to mitigate the risk of them inadvertently exceeding the cap and being exposed to an excess transfer balance cap liability.”

The ATO will continue to engage and work closely with the SMSF sector over the coming weeks and months to support the sector in transitioning to the event-based reporting arrangements announced today.

Almost 300,000 small businesses have taken advantage of the Government’s $20,000 instant asset write-off according to 2015-16 Tax Office data, Minister for Small Business Michael McCormack says.

In 2015-16, the Minister said the number of claims increased by 50,550 and the average amount claimed increased by $4,065 to $9,000.

In the 2017-18 Federal Budget on 9 May 2017, the Government announced an extension to the 2015-16 Budget measure providing an instant asset write-off provision for small business –

Small businesses can immediately deduct the business portion of most assets if they cost less than $20,000 and were purchased between 7:30PM on 12 May 2015 and 30 June 2018 (the threshold amount had been due to revert to $1,000 on 1 July 2017). This deduction is used for each asset that costs less than $20,000, whether new or second-hand.