Do you have a self-managed superannuation fund?
If you have a self-managed superannuation fund, a few concerns have been raised by the ATO.
From the desk of my tax partner Tony Watson, here is a list of self-managed superannuation schemes which the ATO have flagged as concerning:
- Some arrangements involving SMSFs and related-party property development ventures. Whilst there is no specific prohibitions preventing an SMSF investing directly or indirectly in property development ventures, extreme care must be taken. These arrangements can give rise to significant income tax and superannuation regulatory risks. This includes the potential application of the non-arm’s length income (NALI) provisions and breaches of regulatory rules about related party transactions.
- Refund of excess non-concessional contributions to reduce taxable components – where individuals (including SMSF members) deliberately exceed their non-concessional contributions cap with a view to manipulating the taxable and non-taxable components of their superannuation account balances.
- Granting a legal life interest over commercial property to SMSFs – where an SMSF member or other related entity grants a legal life interest over a commercial property to an SMSF resulting in rental income being diverted to the SMSF where it is taxed at a lower rate without full ownership of the property ever transferring to the SMSF.
- Dividend stripping – where the shareholders in a private company transfer ownership of their shares to a related SMSF so that the company can pay franked dividends to the SMSF, the purpose being to strip profits from the company in a tax-free form.
- Non-arm’s length limited recourse borrowing arrangements – when an SMSF trustee undertakes limited recourse borrowing arrangements (LRBA) established or maintained on terms that are not consistent with an arm’s length dealing.
- Personal services income – where an individual (with an SMSF often in pension phase) diverts income earned from personal services to the SMSF where it is concessionally taxed or treated as exempt from tax.
If you have questions about your self-managed superannuation fund, Tony is available to discuss and advise. Please contact Tony via email email@example.com.