• SMSF trustees and voluntary disclosure on dividend stripping arrangements

    In November 2015, we made an offer (‘the Offer’) to self-managed super fund (SMSF) trustees who may have implemented a dividend stripping arrangement substantially similar to the one described in Taxpayer Alert 2015/1 (TA 2015/1).

    SMSF trustees were invited to contact us to make a voluntary disclosure to correct the tax position resulting from such arrangements. The Offer was opened in November 2015 and ended on 15 February 2016.

    Engagement with trustees

    While we are happy with the response we have received to date from affected trustees, we believe there may be many more SMSFs that have arrangements in place similar to the one described in TA 2015/1.

    Many trustees have engaged with us and have self-amended the relevant SMSF annual returns to remove the franking credits received as part of a dividend stripping arrangement. These trustees will receive a letter confirming no further compliance action will be taken in respect of the arrangement.

    Some trustees contended to distinguish their SMSF from the arrangement contained in TA 2015/1 by providing additional information. Upon review of the information, we have granted them another opportunity to consider the Offer where we believe their arrangement is substantially similar to TA 2015/1.

    There are a number of SMSF trustees we believe have a dividend stripping arrangement in place, but who have decided not to take up the Offer. We have since advised them that in order to evaluate their arrangements we will commence compliance action on the SMSF and its associated entities.

    Going forward

    We recognise 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 they think they have done the right thing.

    Trustees who are uncertain about the arrangements they are involved in are encouraged to engage with us and, if necessary, seek an early resolution to any dispute. Consideration will be given to reduced penalties in accordance with our remission guidelines.

    While the vast majority of advisers provide excellent service to protect their clients’ interests, any advisers or other individuals found to be promoting these or similar arrangements will leave themselves open to the possibility of prosecution under the promotor penalty laws.

    Contact us

    Email SMSFStrategicCampaigns@ato.gov.au.

    Put ‘TA 2015/1’ in the subject line and include:

    • SMSF trustee names
    • contact details
    • a time that is convenient for us to call you.
      Last modified: 18 May 2016QC 49007