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  • Super Scheme Smart: Intermediaries

    An increasing number of people are approaching retirement and looking at ways to maximise their retirement assets and income. Now is the time to be super scheme smart and safeguard the future by not being tempted by tax avoidance schemes that are 'too good to be true'.

    We’re currently focusing on retirement planning schemes which are increasingly being used by promoters who are encouraging Australians to inappropriately channel money through their self-managed super fund (SMSF).

    We’re having success in identifying tax avoidance schemes and we are taking action to encourage compliance in a co-operative way. We are also closing down those schemes which are designed to provide an unfair tax advantage.


    Media: Avoid retirement planning pitfalls be Super Scheme Smart Link (Duration: 5:07)

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    Schemes that attract our attention

    We’re concerned with the following superannuation schemes:

    • Related-party property development ventures. Whilst SMSFs can invest directly or indirectly in property development ventures, extreme care must be taken. Some 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.

    For more information refer to SMSF Regulator's Bulletin SMSFRB 2020/1 – Self-managed superannuation funds and property development.

    • Non-concessional cap manipulation – 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 legal life interest over commercial property to SMSFs by an SMSF member or other related entity to divert rental income so that 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.
    • SMSF trustee's undertaking limited recourse borrowing arrangements (LRBA) that are not consistent with a genuine 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 so it is concessionally taxed or treated as exempt from tax.

    Other arrangements we are monitoring relate to the new super caps and restrictions that apply as a result of the super changes that came into operation on 1 July 2017. These include:

    • Improper use of multiple SMSFs to manipulate tax outcomes. Having multiple SMSFs ordinarily do not raise compliance issues, the establishment of additional another SMSFs intended to manipulate tax outcomes, would. For example, switching each of the respective funds between accumulation and retirement phase.
    • Inappropriate use of reserves. Whilst many existing reserves in SMSFs arose legitimately from legacy pensions that are no longer available, we consider that there are very limited appropriate circumstances where new reserves would be established and maintained in SMSFs. Structures using reserves designed to bypass super balance and transfer balance cap measures will attract our scrutiny.

    For more information refer to SMSF Regulator’s Bulletin SMSFRB 2018/1 – The use of reserves by self-managed superannuation funds.

    How you can help

    We are encouraging all advisers in wealth management and retirement planning to think carefully about whether the retirement planning scheme is tax and regulatory compliant. Seek a second opinion from a professional colleague or another trusted practising expert if you think you have been approached by a promoter or inadvertently involved a client in a scheme.

    To help you understand more, we have created an Information pack.

    It includes:

    Most importantly, we want to help the advisers of individual taxpayers to protect their nest eggs. You can contact us by:

    • phoning 1800 060 062
    • completing a tip-off form. The form is also available in the contact us section of the ATO app.

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    Last modified: 11 Apr 2022QC 49660