Speaking at the Institute of Chartered Accountants Australia (ICAA) National SMSF conference in Melbourne this week, ATO assistant deputy commissioner of superannuation Stuart Forsyth said related party dealings “are almost invariably what gets us excited” from a compliance point of view.
Warning practitioners the ATO will be taking a comprehensive approach to loans, related party transactions and audits, Mr Forsyth said the ATO’s strong message is to be vigilant with related party dealings.
He estimated 85 to 95 per cent of trustees are responsible and compliant, which he said is a tribute to their advisers, adding a “plain vanilla fund” is unlikely to have any issue with the ATO.
However it “still continues to surprise and disappoint me” that up to a quarter of all contraventions reported are loans to members.
“People get confused [by] the five per cent test and the fact that you can lend to a related entity five per cent of the assets,” Mr Forsyth said.
“But very few of the loans we see to members are under five per cent. So that’s not really why they’re confused. They are simply dipping into the money. We take, as you can imagine, a fairly dim view of that.”
Limited recourse borrowing arrangements (LRBAs) are another cause for concern, partly due to issues of complexity and timing. Trustees are also convinced to buy a property with the intention of putting it into their SMSF without having consulted an adviser.
“We’ve seen far too many cases of people who have gone out on the weekend and bought a property. Then they go see the adviser on the Monday and they have the contract already. And sometimes the fund doesn’t exist yet,” Mr Forsyth said.
