The West Australian, YOUR MONEY supplement, 1.8.16:
Self-managed funds of $600 billion a tempting prize, ATO warns public
Australia’s $600 billion in self-managed superannuation savings is emerging as a lucrative target for promoters of contrived and potentially illegal tax-minimisation schemes. The Australian Taxation
Office has warned that people over 50 and looking to put away big amounts of money for retirement are the biggest target for a new generation of tax scams.
Spruikers have been targeting accountants, financial planners and SMSF super fund trustees directly in promoting rorts such as generating tax refunds from business profits, making work income tax-free and bypassing the tight rules surrounding DIY super investing in property.
To counter this, the tax office has been sending warnings to professional advisers over the past year -amid fear that promoters were using seminars run by legitimate groups to identify scheme targets.
Its SMSF teams are planning to step up their direct educational efforts with SMSF fund trustees and members in a bid to make DIY super people better able to smell a rort. It has launched a range of information packs under the banner Super Scheme Smart in a bid to counter the spruikers.
Deputy Commissioner Michael Cranston said it was important that SMSF trustees were able to spot warning signs such as someone presenting a seemingly-easy way to save tax that their adviser had previously not suggested or had ruled out.
Mr Cranston said trustees should seek other advice or even call the tax office for reassurance if a scheme looked artificial or did not make sense. “We’ll tell you if it is OK,” he said.
Some of the warning signs included arrangements that involved a lot of paper-shuffling or were designed to leave a taxpayer with zero tax or a refund despite profits clearly being made.
The tax office has found schemes where SMSFs are used to channel work income earned by members so little or no tax is paid.
There are also dodgy promoters pushing schemes around DIY super funds investing in property, which can be very effectively and lawful if done properly.
Yet people are being caught in arrangements that fail to comply with the strict rules covering SMSF borrowings and arm’s-length dealings.
Another major concern are dividend-stripping schemes that involve a small business proprietor’s shares in their business being transferred into the SMSF before big franked dividends are paid on long-retained profits. These schemes can create substantial franking credits that promoters say can be claimed as refunds.
Mr Cranston said trustees who got themselves involved in artificial schemes were risking penalties and tax hits that could seriously erode a person’s retirement savings when they often had little time left to recover from big losses. “It is really hard to rebuild it later in life,” he said.