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Self Managed Super Funds

Australian Taxation Office issues taxpayer alert on SMSFs

The ATO has announced it is reviewing a number of SMSFs in order to crack down on taxpayers improperly using their funds to minimise or avoid tax.

The ATO recently issued TA 2016/6, and you can access the full document explaining the alert here.

The ATO is revising arrangements where individuals divert their personal services income to a SMSF to avoid or minimise tax.

The ATO said that these types of arrangements are commonly used by SMSF members at or approaching retirement age, as income received by the SMSF trustee is concessionally taxed or treated as exempt current pension income, of a SMSF in pension phase.

Deputy Commissioner of the ATO James O’Halloran says, “The SMSF member purportedly avoids paying tax on their income at the marginal tax rate.”

“Under these arrangements an individual performs services for a client for which the individual does not directly receive adequate remuneration for the service provided. Instead, the client refers remuneration for the service to a company, trust or other non-individual entity. The entity then distributes the income to a SMSF, of which the individual is a member, as a return on investment,” James O’Halloran said.

“We are currently reviewing a number of SMSFs that may be involved in this arrangement and will continue to engage directly with taxpayers and their advisors where we have concerns,” he said.

The ATO are encouraging all taxpayers who are a part of these arrangements to seek private ruling or to disclose their position voluntarily, to the ATO.

IMPORTANT:
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

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