Q&A – 23 September 2004
Question: I have heard some rumblings in the industry in relation to the Australian Taxation Office (ATO) applying the anti-avoidance provisions to the re-contribution strategy. What is their current view on the strategy?
Answer: The ATO has recently released a guidance note indicating that it has examined the recontribution strategy and it will generally not attract the anti-avoidance provisions of the Tax Act.
It has specifically stated that the recontribution strategy will not attract the provisions in the following cases.
1. A person withdraws an eligible termination payment (ETP) from their super fund and then recontributes the same or a similar amount shortly after to the same fund to commence a super pension.
2. Variations to the first scenario such as where a person commences a pension in the year or years following the ETP payment, or where the recontribution is made to a fund other than the one that paid the ETP.
The effect of the strategies is to reduce the assessable portion of the annual pension over the person’s retirement years.
Advisers should still be cautious when using this strategy and steer clear of arrangements where several contributions and withdrawals are made in an attempt to turn a substantial portion of the balance into undeducted contributions.
The ATO has indicated that a public ruling will be issued in the coming months.
Jason Menzies is head of technical services, Tribeca .
Got a question?
E-mail: [email protected]
AUTHOR
External
Recommended for you
A new advice licensee set up by former WT Financial advisers has helped financial adviser numbers return above the 15,600 mark this week.
Two separate studies have discovered the majority of advised clients prefer to pay a flat fee for financial advice, while unearthing how much they are willing to pay for the service.
Financial services software Iress and digital community platform Ensombl have partnered up to strengthen the technology skills of financial advisers and paraplanners through a new initiative.
The corporate regulator has commenced “urgent” Federal Court proceedings against a Brisbane-based financial adviser in connection to financial advice and activities on client trading accounts.
