If you think your SMSF deed allows you to circumvent excess contributions tax - think again. The ATO has recently published a Taxpayer Alert which examines the effect of provisions in some SMSF deeds that attempt to avoid excess contributions tax. These arrangements deliver negative taxation and superannuation consequences - both for SMSF trustees and members and for their advisers.
The Cleardocs SMSF deeds are safe. They do not contain the offending provisions.
Other SMSF deeds should be reviewed in light of this article and the relevant Taxpayer Alert.Robert Green
The ATO is targeting provisions in SMSF deeds that try to avoid the payment of excess contributions tax. These provisions:
People relying on these provisions assert
(incorrectly, in the ATO's view) that the excess contributions do not
attract excess contributions tax.
If you would like to learn more about contribution caps, then you can read earlier ClearLaw articles here
The ATO lists the taxation implications of these arrangements — namely "whether:
This final point is particularly important
for advisers who recommend SMSF deeds containing the arrangements.
There are serious penalties for advisers found guilty of promoting a
tax exploitation scheme under the TAA.
The ATO lists the implications of these arrangements under the Superannuation Industry (Supervision) Act 1993 (SIS Act) and its Regulations, namely:
That is, before funds can be released to a member, a condition of release must be met. Clearly, refunding excess contributions to avoid excess contributions tax is not a condition of release.
The intermingling of super and non-super assets may breach section 52 of the SIS Act, which requires that the trustees of the SMSF keep the assets of SMSF separate from assets held by the SMSF trustees personally, and assets held by a standard employer sponsor or any associate of a standard employer sponsor of the SMSF.
The ATO's view is that the arrangements described above are ineffective.
Consequently, the ATO considers that:
The ATO does not, however, explain why such arrangements are ineffective or exactly how the sole purpose test will be breached. It simply refers to Taxation Ruling 2010/1 (with respect to superannuation contributions) and SMSF Ruling 2008/02 with respect to the sole purpose test.
Presumably, the ATO's position is that:
If you are in any doubt as to whether your SMSF deed contains such arrangements, then please contact Maddocks on 03 9288 0555. Alternatively, you can consider updating your SMSF deed to the Cleardocs deed — the Cleardocs deed does not contain the ineffective arrangements.
For more information please contact Maddocks in Melbourne (03 9288 0555) and ask for a member of the Superannuation Team.
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Daniel is a lawyer in the Maddocks Tax & Revenue team.Daniel advises extensively in the following areas:
His advice covers both direct and indirect tax considerations.
Prior to joining Maddocks, Daniel worked at a Big Four Chartered Accounting Firm focusing on tax consulting for mergers and acquisitions.
The legal information and commentary on this site is general only. Documents ordered through Cleardocs affect the user's legal rights and liabilities. To assess their suitability for the user, legal accounting and financial advice must be obtained.
For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of their team.