The Australian Taxation Office (ATO) has issued a taxpayer alert to self-managed super fund (SMSF) trustees, warning them about the non-commercial use of negotiable instruments as a way to receive tax or other superannuation benefits.
Specifically, the SMSF regulator is worried about transactions where a trustee issues a promissory note to a member to pay a benefit or transactions where a person issues a promissory note to an SMSF in place of a contribution.
No money or assets are ever exchanged with either of these arrangements.
“We are concerned with the non-commercial use of promissory notes to avoid the need to liquidate assets in order to change the timing of transactions, or to obtain tax advantages that are not available in the circumstances,” ATO commissioner Michael D’Ascenzo said.
“In particular we are concerned taxpayers may be led into these non-commercial transactions hoping to take advantage of the existing super concessional contributions caps, in view of the government’s budget announcement to halve the existing concessional contributions caps from 1 July 2009,” he said.
In regard to the Superannuation Industry Supervision (SIS) Act, the ATO suspects these transactions may breach the legislation by not meeting the benefit payments standards or the contributions standards, the in-house asset provisions, and the restrictions on SMSFs acquiring assets of a related party.
In reference to tax law, the ATO is concerned these types of arrangements may change the timing for contributions to allow members to avoid paying taxes for excess contributions.
The regulator is also worried these transactions may be a breach of anti-avoidance provisions contained in the Income Tax Assessment Act, and that illegal early access promoters may be instigating these types of transactions.
