The old adage “if it sounds too good to be true then it usually is” holds firm especially with superannuation “release” schemes. The ATO is stepping up its education efforts to help consumers while clamping down on promoters of such schemes. Here at SMSF Coach and our sister firm Verante Financial Planning we are always willing to offer a second opinion on any recommendation you are concerned about.
The Australian Taxation Office (ATO) is extending a helping hand to pre-retirees through Super Scheme Smart, a new initiative launched recently that educates people on the dangers of risky and illegal retirement planning schemes.
The ATO has identified a significant number of retirement planning schemes designed solely to help people avoid paying tax on their assets in an illegal manner and is working to close these down.
From the ATO media video below with ATO Deputy Commissioner, Michael Cranston, he warns:
While retirement planning schemes can vary, there are some common features that people should be aware of. Usually these schemes:
• are artificially contrived and complex, usually connected with a SMSF
• involve a lot of paper shuffling
• are designed to leave the taxpayer with minimal or zero tax, or even a tax refund
• aim to give a present day tax benefit by adopting the arrangementIndividuals caught using an illegal scheme identified by the ATO may incur severe penalties under tax laws. This includes risking loss of their retirement nest egg and also their rights as a trustee to manage and operate a SMSF.
The ATO is delivering practical help and information through their Super Scheme Smart website, including a comprehensive information pack, case studies and videos, as well as sending taxpayer alerts into the community about schemes and why they don’t fit within the law.
Mr Cranston urged people undertaking retirement planning to remain vigilant and to come forward if they believe they are at risk or are already involved in a scheme.
“Retirement planning makes good sense provided it is carried out within the tax and superannuation laws. Make sure you are receiving ethical professional advice when undertaking retirement planning, and if in doubt, seek a second opinion from an independent, trusted and reputable expert.
“We do our best to shut down dodgy schemes but the best defence is working together. Blowing the whistle on those promoting retirement planning schemes will help us stop them from risking your or others’ retirement savings,” Mr Cranston said.
All those approaching retirement who are yet to get “Super Scheme Smart”, are encouraged to take advantage of these resources and report promoters of dodgy schemes by calling 1800 177 006, or via email to reportataxscheme@ato.gov.au
Some examples provided of the current schemes they are concerned about include:
The schemes the ATO are currently worried about include:
- Dividend stripping – Where the shareholders in a private company transfer ownership of their shares to a related SMSF so that the company can pay franked dividends to the SMSF. The purpose being to strip profits from the company in a tax-free form. (refer to Taxpayer Alert (TA 2015/1))
- Non-arm’s length limited recourse borrowing arrangements – When an SMSF trustee undertakes limited recourse borrowing arrangements (LRBAs) established or maintained on terms that are not consistent with an arm’s length dealing. For more information, see Practical Compliance Guide.
- Personal services income – Where an individual (with an SMSF often in pension phase) diverts income earned from personal services to the SMSF where it is concessionally taxed or treated as exempt from tax (refer to Taxpayer Alert (TA 2016/6)).
As mentioned above at Verante Financial Planning we take very good care of our clients and ensure all our client strategies are fully compliant and tick all the boxes so our client can sleep securely at night know that while they have used the superannuation and tax systems to maximise their savings position, they are always within the regulations and the spirit of the law.
The whole focus of this blog, the SMSF Coach is about educating and promoting use of legal strategies and we are consistently warning people of the pitfalls of some strategies and investments out there such as our recent warning on the failed GUEVRA IPO not being suitable for SMSF clients or our very popular Property through super in a SMSF – Part 3: 20 most common mistakes
I hope this guidance has been helpful and please take the time to comment. Feedback always appreciated. Please reblog, retweet, like on Facebook etc to make sure we get the news out there. As always please contact me if you want to look at your own options. We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or via Skype. Just click the Schedule Now button up on the left to find the appointment options.
Liam Shorte B.Bus SSA™ AFP
Financial Planner & SMSF Specialist Advisor™
Tel: 02 98941844, Mobile: 0413 936 299
PO Box 6002 BHBC, Baulkham Hills NSW 2153
5/15 Terminus St. Castle Hill NSW 2154
Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572
This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
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