ATO Commissioner Chris Jordan is particularly focused on SMSFs being used as tax avoidance vehicles rather than as retirement savings vehicles, said Kasey MacFarlane, the ATO's acting assistant commissioner, superannuation, at the Chartered Accountants Australia and New Zealand National SMSF Conference on the Gold Coast.
Mr Jordan believes this kind of activity is both “outrageously bold and straight up and down not on”, said Ms MacFarlane.
The ATO has ever-increasing access to data and intelligence through other government agencies as well as other business units within the ATO, Ms MacFarlane warned, which substantially increases the likelihood of tax-avoidance schemes being detected.
“The other thing to mention about tax-avoidance schemes is that the income tax and regulatory issues will be addressed together, they won’t be treated in isolation. So SMSF trustees detected in engaging in tax avoidance schemes should be put on notice that they are likely to face the possibility of being disqualified as trustees and potentially having their fund made non-complying,” she said.
“These arrangements generally are only adopted by a very small minority in the SMSF sector, but they do actually pose a serious threat to the integrity of the system. You can expect that the commissioner will take very strong compliance action when he detects these types of arrangements,” she added.
Ms MacFarlane said the ATO is continuing to pursue and scrutinise dividend stripping arrangements, which are referred to in TA 2015/1.
The ATO has also been reviewing variations of the situations outlined in TA 2015/1, and has concluded they are not effective at law, she said.
“Just because an arrangement that you enter into may not be [exactly] what is described in the Taxpayer Alert doesn’t mean that it’s OK,” she said. “We’ve seen variations. We’ve also reviewed those arrangements and we decided those aren’t effective at law. In the very near future we are publishing an addendum highlighting the fact that these variations are also not OK.”
On the issue of ATO penalties, Ms MacFarlane said she is confident that the penalty regime that came into effect on July 1 last year will result in fewer civil penalties and costly litigation for SMSF trustees.
However, she warned that persistent instances of non-compliance will not be well received by the commissioner and will entail more serious consequences.
She reminded SMSF trustees to be conscious of their SuperStream obligations to avoid their employer contributions being directed to a default fund.
Employees with SMSFs must provide relevant e-commerce details to their employer, including the SMSF’s ABN, bank account details, and electronic service address.
“A trustee that doesn’t provide [these details] will get an error message telling employers to provide employees with a super fund choice form. If it is not sent back in 28 days, the employer will contribute that money to the default fund. The money is not lost but then you have to go through the whole admin process to retrieve the funds,” Ms MacFarlane said.