ATO has sent a strong message to trustees that it will be taking a vigilant approach to loans, related party transactions and audits.
The comments were made at the Institute of Chartered Accountants Australia (ICAA) National SMSF conference in Melbourne, with Stuart Forsyth ATO assistant deputy commissioner of superannuation indicating that the ATO will be ‘vigilant with related party dealings”, but have assured the public that, “If they are running a plain vanilla fund and not making loans to members, they will have, very little issue with the ATO.”
Forsyth added that, “with 20 to 25 per cent of all contraventions reported being loans to members, if penalty laws are introduced in the new parliament, the ATO will run a marketing campaign detailing that a loan to a member is a breach.”
Forsyth has indicated that people are often confused about the five per cent test and has reiterated that,” you can lend to a related entity five per cent of the assets 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.”
Other concerns highlighted by the ATO’s conference included: limited recourse borrowing arrangements (LRBAs), and low-cost audits. However, the conference was not entirely doom and gloom with the assistant deputy commissioner acknowledging that, “85 to 95 per cent of SMSF trustees are responsible and compliant, which is an acknowledgement of the work of advisers.”