The ATO’s warning on risky retirement planning arrangements, made last week as part of its Super Scheme Smart initiative, was carried out to prevent SMSF trustees from falling foul of these arrangements before they gained any market momentum, according to one of the regulator’s senior officials.
Speaking to selfmanagedsuper, ATO deputy commissioner James O’Halloran said: “What we’re not doing is waiting for these things to become commonplace where people can in fact find themselves financially disadvantaged or even ruined, therefore we’ve come out well before we’ve commenced any material casework to prevent people from falling into these traps.” The latest announcement made via the Super Scheme Smart facility identifies three specific scenarios SMSF trustees need to be aware of. The first is to do with related-party property development ventures using interposed units trusts to channel revenue to an SMSF that will be taxed at the concessional rate. The second is a strategy where the non-concessional contributions cap is deliberately breached and then refunded from the taxable component of the SMSF to ultimately reduce the tax payable. And the third situation is where a legal interest is granted to an SMSF for the life of a particular member, enabling the fund to receive all of the member’s revenue from the asset but not ownership upon that member’s death. “These schemes sound quite practical and even logical, but quite often there is an underlying risk that people should be cautious about because ultimately it’s their retirement that is impacted,” O’Halloran said. In its material, the ATO points out questionable schemes are often put to an SMSF trustee by a promoter, and O’Halloran points out the ATO is encouraging two courses of action. “One is that they seek advice from a reputable source and not just take a conversation at face value. Of course, if people believe they’ve unwittingly become involved in these things, we ask them to obviously come forward and also seek advice,” he suggested. “The earlier we can work with people that unwittingly find themselves confronted with these circumstances, the better.” Apart from the pre-emptive element of the initiative, O’Halloran stressed the time of year makes the announcement particularly relevant as well. “If you look at this time of year, and also as a consequence of the focus on superannuation, we think it is timely to remind people who may be thinking of retirement that some things they may hear or contemplate, particularly over the next few months, need to be carefully considered because ultimately they could have a dramatic impact and a negative impact on their retirement and their SMSF itself,” he said.
By Darin Tyson-Chan
Self Managed Super Magazine
20 November 2017