Offer to SMSF trustees to address dividend stripping arrangements
In the next few months, we will contact Self-managed superannuation fund (SMSF) trustees who may have implemented the types of dividend stripping arrangements described in Taxpayer Alert 2015/1 (TA 2015/1) in the income tax years ended 30 June 2011 to 30 June 2015.
We will offer trustees the option to either self-amend relevant SMSF annual returns (SARs) or to contact us to make a voluntary disclosure to correct the tax position resulting from such arrangements.
We recognise the importance of preserving the assets which SMSFs hold to fund retirement incomes, hence we are only seeking to unwind the divided stripping arrangements that SMSFs may have in place.
Trustees who have implemented an arrangement substantially similar to the one described in TA 2015/1 and its addendum and who choose to self-amend won’t be subject to administrative penalties. However, interest charges may apply.
To be eligible for concessions
In order to be eligible for the penalty concession and avoid compliance action, trustees who are not contacted by us earlier, must lodge the relevant amended SAR(s) by no later than 15 February 2016.
Trustees will not be eligible for the offer where we:
- believe that the arrangement is beyond the scope of TA 2015/1 and its addendum; or
- identify other significant income tax and/or superannuation regulatory issues present in the SMSF subject of the dividend stripping arrangement.
Trustees who are not eligible for this offer are encouraged to contact us so we can work together to resolve the issues with consideration of reduced penalties in accordance with our remission guidelines.
We recognise that some arrangements may look right and trustees think the advice they have received is sound, but there may still be underlying problems such as those identified in TA 2015/1. We don’t believe trustees should be harshly punished when you think you have done the right thing.
- TA 2015/1 Dividend stripping arrangements involving the transfer of private company shares to a self-managed superannuation fund
How to self-amend
- Review and amend the SAR(s) for the applicable income tax year(s) to remove the relevant franking credit amount(s). To do so, ensure that the following adjustments are made
- select Y at Question 5 (or 5A in the 2014 annual return)
- remove the dividend franking credit amount from Section B, Label L (or if a trust distribution, remove from the grossed up amount at Label M)
- remove the franking credits tax offset amount from Section D, Label E1 and from the total of Label E
- Lodge any amended SAR(s).
For those who are yet to lodge their 2015 SAR, the relevant franking credits should not be claimed in this and any subsequent SARs.
Put ‘TA 2015/1’ in the subject line, include the SMSF trustee name(s), contact details and a time that is convenient for us to call you.
Review your client base and consider the available options.
SMSF trustees who have entered into potential dividend stripping arrangements are encouraged to self-amend or contact the ATO.