ATO targets SMSFs and home loan unit trusts
The Australian Taxation Office (ATO) has signalled it has identified new non-compliant arrangements around Self Managed Supearnnuation Funds (SMSFs) and residential property investments via home loan unit trusts.
ATO Assistant Commissioner, SMSFs segment, Matt Bambrick said the ATO had identified a potential home loan unit trust arrangement which involved the purchase of a residential property by a non-geared trust whereby units were purchased by the SMSF, related family trust and SMSF members. Address a CPA Australia SMSF seminar, Bambrick said the purchase of the asset was effectively financed by the SMSF and the property was occupied and rented by the member with the rental income, less expenses, paid out to unit holders but with the proportion of distributions not being consistent year by year.
"…trustees should be aware of the potential to contravene the sole purpose test and/or of providing financial assistance to a member," he said. "If there is a form of ‘gearing' or investments in other entities involved within the trust, then the SMSF may also be in breach of the in-house assets provisions."
Elsewhere in his address, Bambrick also pointed to the ATO's scrutiny of dividend washing within SMSFs, pointing out that the Government had introduced retrospective legislation to close the loophole giving rise to dividend washing.
"In March, we sent self-amendment letters to about 2000 SMSFs we identified as potentially having implemented this arrangement. Of the identified SMSFs, 38 per cent were in pension phase," he said.
Bambrick also said the ATO was keeping an eye on promoters who advertise questionable SMSF conferences in overseas destinations.
"The promotions target SMSF trustees citing they can claim a deduction for the full cost of the travel, accommodation and meals component incurred when attending these seminars or workshops [but] the conferences appear to contain minimal training related to SMSF activities," he said.
"Trustees contemplating attending such events should be aware of the potential to contravene the sole purpose test."
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