The anti-fraud measures recently introduced by the Australian Taxation Office (ATO) in relation to the registration of self-managed superannuation funds (SMSFs) have resulted in problematic issues in other areas for advisers and trustees.
To make the process of registering an SMSF more difficult for fraudsters looking to promote illegal early access schemes the ATO introduced a new classification for funds just set up called ‘Registered – Status: Not Determined’.
This status remains with the fund until the first annual return is lodged and a notice of compliance is received from the regulator.
The wording of this status however is in some cases causing confusion among financial services organisations not completely familiar with the SMSF sector.
“We are aware of a recent situation where an SMSF was established for the purpose of undertaking a limited recourse borrowing investment with an external lender, only to have the external lender nearly pull the plug on the transaction because a due diligence search on the fund identified that the funds status was ‘Not Determined’,” SMSF legal specialists Super Central said.
They suggested two potential courses of action for advisers and trustees to take to resolve this type of situation.
“First, when dealing with individuals and organisations who are not acquainted with SMSF mysteries – to forewarn them of the status and to explain the reason and the significance of it. In this manner, expectations are managed and issues resolved,” Super Central said.
“The second (if circumstances permit), is to establish the fund in late June with a view to lodging an annual fund return early in the new financial year, thereby bringing forward the issue of the notice of compliance and a quick change of moniker.”
