Speaking at the CPA SMSF conference last week, the ATO’s Kasey MacFarlane, assistant commissioner, SMSF segment, superannuation, confirmed that SMSF trustees cannot segregate part of an asset.
ATO determination TD 2014/7, issued last year, specified the circumstances in which the bank account of a complying super fund is a segregated current pension asset, Ms MacFarlane said.
“Since issuing this determination we’ve received a steady flow of questions with respect to the partial segregation of other asset types,” she said, but noted the tax office considers “it’s not possible to segregate part of an asset”.
“If you can’t separate an asset – for example, a holding of real property – how can you demonstrate the asset was separate and held solely to support pension liabilities?”
This does not apply to parcels of shares, however, given that each individual share was an asset in its own right, Ms MacFarlane added.
“If the fund holds 100 shares in a company you could say, for example, that 50 were segregated,” she said. “We would expect this segregation of assets and the related income to be appropriately documented as being so.”
At 30 June 2014, there were one million SMSF members and about 39 per cent reported receiving pension payments, worth a total of $19.1 billion.
The ATO expects a further 250,000 members to be eligible for retirement benefits over the next 10 years.
This means the tax office will continue to home in on SMSFs in pension phase and is urging trustees and their practitioners to be aware of the significant tax consequences of even simple misunderstandings.
“If you get pensions wrong there are financial consequences, which we don’t want people to have,” the ATO has said. “As more people move into this phase, we want to make sure they get it right.”