With self-managed super funds (SMSFs), we focus on transactions and schemes that aim to inappropriately take advantage of concessional tax rates that apply to complying super funds.
Our attention is attracted by:
- schemes in which parties were not dealing with each other at arm's length and non-arm’s length expenditure either has
- been incurred in gaining or producing ordinary or statutory income
- not been incurred but would have been expected to be incurred if the parties were dealing with each other at arm’s length
- other issues including
- income from property developments being inappropriately diverted into SMSFs (see SMSF Regulator’s Bulletin SMSFRB 2020/1)
- intra-group lending and guarantee arrangements that inappropriately benefit SMSFs (see SMSF Regulator’s Bulletin SMSFRB 2020/1)
- income derived by a fund through a fixed entitlement to the income of a trust
- issues around valuation of any type of property being indirectly or directly purchased from a private group
- significant management and administration expenses
- private company dividends or unit trust distributions being diverted to SMSFs
- illegal early release of superannuation benefits
- personal services income diverted to SMSFs
- incorrect calculation of exempt current pension income.
We know some schemes target Australians planning for their retirement and encourage people to channel money inappropriately through their SMSF.
The Super Scheme Smart aims to educate individuals and their advisers about these schemes.
These schemes have some common features. They:
- are artificially contrived with complex structures, usually connecting with an existing or newly created SMSF
- involve a significant amount of paper shuffling
- aim to give a present-day tax benefit, often resulting in the individuals involved paying minimal or zero tax, or even receiving a tax refund
- sound too good to be true and, as such, they generally are.
For guidance and rulings, see:
- TR 2006/7 Income tax: special income derived by a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust in relation to the year of income (special income was the predecessor to NALI)
- LCR 2021/2 Non-arm’s length income – expenditure incurred under a non-arm's length arrangement
- PCG 2020/5 Applying the non-arm's length income provisions to 'non-arm's length expenditure' – ATO compliance approach for complying superannuation entities