SMSF trustees must be very vigilant concerning tax: ATO

Property investors who use their self-managed super funds to borrow and acquire real estate will need to ensure they fully understand their obligations and comply with the letter of the law, says the Australian Tax Office.

The warning has come from the very top of the industry, with ATO superannuation assistant commissioner Stuart Forsyth saying the forthcoming year will be a “big year” for regulation and compliance.

“We are acquiring new powers to prevent breaches of legislation,” Forsyth said during his keynote speech at the Institute of Chartered Accountants’ National SMSF Conference in Melbourne today.

“There will be minimum adverse impacts on people who do the right thing. “

Property investors who set up new DIY funds will receive particularly close attention (about 60,000 new SMSF funds register with the tax office each year), with ignorance of the rules and obligations unlikely to curry much favour with the ATO.

Areas that will receive special focus from the ATO will include breaching contribution caps and illegal early release of funds.

“One SMSF trustee has been sent to jail for long-term breaches and failure to lodge,” Forsyth says.

“You need a blooming good reason not to lodge.”

Speaking as part of the panel discussion following Forsyth’s address, Professor Gordon Cooper, principal of accountants Cooper & Co, accused the ATO of being “ridiculous and draconian” in how it deals with breaches of contribution caps.

He gave the example of a client who was issued with a $70,000 due to being $10 over her contribution cap. Cooper was only able to get the assessment waived due his client being ill and being poorly advised.

“If she were not ill, she would most likely have had to pay the $70,000,” he says.

Also part of the discussion, Liz Westover, head of superannuation at the ICA, advised trustees to engage with the tax office rather than bury their heads in the sand – “that way you have a much better chance of a favourable outcome”.

The ATO is considering devising an online course that would be required for trustees.

The ATO has provided a list of acceptable ways for SMSFs to invest in property. For more on the rules regarding self-managed super funds and property, see our e-book 16 questions self-managed super fund trustees should ask before investing in property.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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