SMSF update from the ATO

In a recent speech, Alison Lendon, Deputy Commissioner Superannuation, spoke to a number of issues that affect super funds and their trustees and advisers. The following are excerpts:

Applying to the ATO for advice

If trustees of superannuation funds want a written explanation of the ATO’s view on how the super laws apply to their SMSF, they can apply for ‘SMSF specific advice’.

While this advice isn’t legally binding, it will provide certainty to trustees about the application of the super laws to their fund, and the fact that trustees acted in accordance with the advice would be an important factor in their favour. We can assist with this application process.

The most common topics the ATO is asked about for specific advice are:

  • confirming when a property meets the requirements to be ‘business real property’, and working through the acquisition of business real property from related parties;
  • understanding the limitations of investing in related unit trusts;
  • what’s an ‘improvement’ or a ‘repair’ to property acquired under a limited recourse borrowing arrangement (LRBA);
  • the acquisition of assets from related parties and low-interest loans for LRBAs; and
  • requests about collectable and personal use assets since specific requirements regarding their storage and usage were introduced in 2011, especially regarding insurance and gold bullion.

Related party transfers

From 1 July 2013, new legislation will broaden the types of assets currently prohibited from being acquired from a related party, but will also provide more transparent exceptions whereby acquisitions will be permissible.

By way of example, the acquisition of ‘business real property’ will be prohibited unless acquired at market value as determined by a qualified independent valuer. Similarly, listed securities acquired from a related party will also be prohibited unless they are acquired in a way that is prescribed under the regulations. The legislation will also introduce a prohibition on the disposal of SMSF assets to a related party, unless similar exceptions are satisfied.

ATO’s motor vehicle data matching program

The ATO has obtained, or will obtain, data identifying all motor vehicles sold, transferred or newly registered in the 2011/12 and 2012/13 income years, where the transfer and/or market value is $10,000 or greater, from all of the State and Territory motor vehicle registering bodies.

Data relating to approximately 2.8 million individuals will be matched against taxpayer records to identify those participating in the cash economy, and/or those who may not be declaring all their income or deliberately avoiding their tax obligations.

The ATO recommends that those identified as being at risk of potentially skimming some or all of their cash takings, running part of their business ‘off-the-books’, or in other ways not reporting all their income, contact them to make a voluntary disclosure of any under-reported amounts.