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ATO reports back on top 100 SMSFs probe
After risk profiling the top 100 highest-value SMSFs, the ATO has announced that it will further examine 35 per cent of these funds, particularly where they have experienced rapid levels of growth.
Speaking at the SMSF Association Conference, assistant commissioner Dana Fleming said that the ATO has now completed its risk profiling of the 100 SMSFs with the greatest assets.
Ms Fleming said that the program is focused on identifying aggressive tax planning within the top 100 SMSFs by value of assets.
“The purpose of this program is to provide assurance to us, and the general population, that the high-value SMSFs have acquired their assets in compliance with the regulatory framework and are appropriately accessing the tax concessions offered by that environment,” Ms Fleming explained.
After completing the risk profiling, Ms Fleming said that the ATO will be taking a closer look at 35 per cent of these funds.
“The things that made us want to take a closer look at that 35 per cent are the use of limited recourse borrowing arrangements, particularly in conjunction with an excessive or rapid growth rate,” she said.
“In 10 per cent of funds in the past four years, we’ve seen an extraordinary rate of growth, which has usually been in connection with property development, acquisition of commercial properties from other entities from within the group or a revaluation of listed or unlisted shares.”
She also noted that the ATO identified 13 per cent that are linked to previous actions that have been taken, and said that the SMSF segment is collaborating very closely with the ATO’s private groups and individuals area.
“This is an ongoing investigation for us, but I can share that several have been referred to our private groups area for additional investigation. We are also reviewing several ourselves very closely,” she said.
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
I agree with these "further investigations" by the ATO, those who abide by the existing SMSF rules would have nothing at all to fear even if they have had exceptional growth in any period of time. These would be the vast majority of SMSF trustees who work within the SMSF framework. However, the safe rules might be about to change as Bill Shorten will show us if he gets his way, Bill would be the biggest threat not the ATO.0- The purpose would, self-evidently, be to tell if the exceptionally high growth found in some of the top 100 SMSFs was a 'good thing' or an 'illegal thing'...
At this stage it is only a 'closer look' to ensure that they 'have acquired their assets in compliance with the regulatory framework'. Nothing untoward about that. My guess would be that they want to ensure that there aren't any cases of an SMSF borrowing a large amount (possibly from a related party), buying a development 'off the plan' from a related party at a below-market rate, and then selling the finished property to the same or another related party for full (or more than) market price a short time later. That would be a classic case of NOT 'appropriately accessing the tax concessions offered by that (superannuation) environment' in order to make artificially large windfall profits within the concessionally taxed SMSF environment, while at the same time reducing taxable profits outside of super. It might not even be related parties, just a case of collusion and kick-backs to create a larger gain within the SMSF and lower taxable profits for the developer.
Of course it may be that this sort of thing has not been done ever, by any SMSF. But if you want to do a spot check to make sure everything is being done correctly, 'checking the books' of the largest SMSFs that have shown exceptionally high rates of recent growth in asset valuations seems like a pretty good place to start.
Those who think this is 'straight out of a Kafka novel' may want to explain how else the SMSF regulator is supposed to verify that SMSFs are actually acting according to the regulations? Oh yes, the trustees and Joe Bloggs their friendly auditor signed off on the annual compliance statements so it MUST have been done correctly. Why not just do away with having a regulator completely?0 - Read between the lines people. I suspect that the ATO is concerned that windfall profits are being run into the SMSF in order to reduce tax - ie the profits don't really belong to the SMSF. I have actually seen this in practice, so I don't doubt that the ATO will have some big wins.
I feel sorry for the auditors who were deceived and will be held to account by the crooks.0 - Why not change the laws to constitutionally protected super funds0
- Let me get this straight. SMSFs should not be allowed to gear because it's too risky. But then when they do gear and it's really successful they get investigated by the ATO. Our super/tax administration is straight out of a Kafka novel.0
- "...In 10 per cent of funds in the past four years, we’ve seen an extraordinary rate of growth..."
Is this a good thing or is it a concern for the ATO? I'm assuming the more self funder retirees there are (due to rapidly growing super) the less pressure it would have on the government. So, it's solving a problem right?0 - Whats the purpose of this?0
- It's a witch hunt. The ATO seeking to be seen to be doing "something".... For all the talk of $100M SMSFs in the past, it's been found that all these really large funds were started decades ago before they were called SMSFs, they've always followed the rules, and been both considerably astute and lucky in their investment choices.0
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