Issue: 116
Sent: 17-06-2008 13:00:03
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ATO Taxpayer Alert on Super Contribution Strategies - Tony Negline
Last Friday the ATO issued a very important Taxpayer Alert and related Press Release.
The Taxpayer Alert largely deals with issues about superannuation contributions. All the issues ultimately revolve around trying to get around the excess contribution limits (and enable larger retirement benefits without incurring excess contributions tax).
The following matters were dealt with in the Taxpayer Alert:
- in-specie contributions: the ATO is hearing that some people seem to be suggesting that the transaction needs to take place at a discernible market price (that is, the closing sell price if listed equities on an eligible exchange) and that the super fund needs to 'buy' at the price and the owner needs to use that price for CGT purposes. It is obvious that some people would want these types of transactions to be done at a value lower than market value. One way that some people would want to use to get around having to use a high market price is to perform the transaction on a day when the market value is its most convenient. The ATO is saying that a person needs to be very careful before proceeding with this approach.
- expenses of the fund -- Miscellaneous Tax Ruling MT 2005/1 (released on 26/4/05) deals with this issue is greater detail; basically expenses paid by an employer or other individual are deemed to be contributions. Some people are not abiding by this 'rule' and are paying fund expenses (administration fees, tax payments, legal fees, insurance premiums, etc) on behalf of funds but the payments are not recording as contributions. The ATO is in the process of preparing an income tax ruling on the deductibility of superannuation contributions. A draft of this ruling is due to be released sometime in October 2008.
- asset improvements -- another strategy some people are using is to personally pay for improvements to a fund asset but not record these payments as contributions
- unit trust investments -- this is best described by quoting directly from the ATO Taxpayer Alert, "A person, usually a member of the fund or their associate, together with the trustee of the fund owns all of the units in a non-leveraged unit trust or shares in a company and further units or shares are issued or the rights attached to the units or shares are altered so that the value of the units or shares owned by the fund is increased."
As always it's fascinating what some strategies people will employ in order to work around the super and tax laws.
On a completely different topic, the ATO did say that they are continuing to work on the new gearing rules especially the provision of guarantees. The ATO is also interested in the tax impacts for a super fund who enters into one of these arrangements with a non-arm's lender. Presumably these funds are assuming that the tax impacts are the same that applies to Instalment Warrant products rulings which are issued from time to time. This may be a dangerous interpretation if the trust holding the borrowing is not a security trust.
Finally what should or should not be in your SMSF investment strategy? What does the regulator expect to see? What other sources of information may be relevant? Do you have trouble talking to your centres of influence about SMSF Investment Strategies and how you might be able to help? We hope you find the following guide of assistance in your endeavours: https://www.atcbiz.com.au/smsf_investment_strategy_paper.php
One recent purchaser had the following to say about this document, "It's a very useful document, the best I've come across in my search far and wide for practical assistance with putting together a SMSF."
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