‘Too Good To Be True’: Watch Out For These Three Dodgy Retirement Schemes, ATO Warns

DODGY investment schemes intended to take advantage of complex superannuation loopholes are being spruiked to unsuspecting retirees, putting them at risk of significant penalties, the Australian Taxation Office has warned.

The ATO says it has identified three specific “retirement planning schemes” being shopped around at various forums such as superannuation conferences, all of which relate to channelling income through self-managed superannuation funds (SMSFs) to avoid paying tax.

“They might sound good but in fact they’re too good to be true,” said ATO Deputy Commissioner James O’Halloran. “By drawing attention to these three schemes that concern us, obviously we’re trying to prevent people accidentally moving into them.”

The first scheme involves artificial arrangements involving SMSFs and “related-party” property development ventures.

The second relates to an individual or related entity granting “legal life interest” over a commercial property to an SMSF, resulting in the rental income being diverted to the SMSF and taxed at lower rates while the individual retains legal ownership of the property.

The third relates to individuals deliberately exceeding their non-concessional superannuation contributions cap in order to manipulate the taxable component and non-taxable component of their fund balance upon refund of the excess.

“With the changes to super [announced earlier this year], people are obviously exploring all sorts of scenarios,” Mr O’Halloran said. “We’re warning people [against] anything which suggests what I would call ‘inventive’ use [of SMSFs] bordering on aggressive tax minimisation.”

He said dodgy arrangements may be cleverly disguised to look legitimate, involve “a lot of paper shuffling” and are framed as being designed to give the taxpayer a minimal or zero amount of tax or even a tax refund or concession.

But 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,” he said.

The ATO has released detailed information on these illegal arrangements through its Super Scheme Smart program, breaking down how they work, warning signs to look for and where to go for help.

Mr O’Halloran said no penalties had yet been handed down for these particular schemes. “We’re actually trying to prevent these three in particular getting a groundswell, so we’re quite intentionally going out early,” he said.

Possible penalties range from unpaid tax bills to the SMSF itself being deemed non-compliant in the most extreme cases, in which case the ATO confiscates 50 per cent of the fund’s assets. Fewer than 50 funds are deemed non-compliant by the ATO each year.

“There is a real impact on individuals moving into retirement who may even accidentally find themselves entering into these schemes,” Mr O’Halloran said.

By Frank Chung

Herald Sun

16 November 2017

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