The ATO is warning self-managed super fund (SMSF) trustees about the risks of some emerging retirement planning arrangements.
Retirees or SMSF trustees who are involved in any illegal arrangement, even by accident, may face severe penalties, risk losing their retirement savings, and potentially, their rights as a trustee to manage their own fund.
The Tax Office has released additional information through their Super Scheme Smart Program to help educate retirees and trustees of these complex tax avoidance schemes and arrangements.
Super Scheme Smart provides case studies and information packs to ensure taxpayers are informed about illegal arrangements including what warning signs to look for and where to go for help.
Many of the arrangements are cleverly designed to look legitimate, give a taxpayer a minimal or zero amount of tax or tax refund or concession, aim to give a present day tax benefit and involve a fair amount of paper shuffling.
Some arrangements may be structured in a way which appears to satisfy certain regulatory rules, however, these arrangements are often ‘too good to be true’ and are in fact illegal.
Among the ATO’s previous concerns about dividend stripping arrangements and contrived arrangements involving diversion of personal services income to an SMSF, there are some new arrangements on the Tax Office’s radar, including:
- Artificial arrangements involving SMSFs and related-party property development ventures.
- Arrangements where an individual or related entity grants a legal life interest over a commercial property to an SMSF. This results in the rental income from the property being diverted to the SMSF and taxed at lower rates whilst the individual taxation or related entity retains legal ownership of the property.
- Arrangements where individuals (including SMSF members) deliberately exceed their non-concessional contributions cap to manipulate the taxable component and non-taxable component of their fund balance upon refund of the excess.
If you are concerned about your involvement with such arrangements, you can contact the Tax Office early to work towards a resolution.