The ATO issued TA 2016/6 this morning. You can access the full document here.
As foreshadowed by SMSF Adviser earlier this month, the ATO is reviewing arrangements where individuals divert their personal services income to a SMSF to minimise or avoid tax.
These types of arrangements are typically used by SMSF members at or approaching retirement age as income received by the SMSF trustee is concessionally taxed or treated as exempt current pension income of an SMSF in pension phase, the ATO said.
“In other words, the SMSF member purportedly avoids paying tax on their income at the marginal tax rate,” said deputy commissioner James O’Halloran.
“Under these arrangements an individual performs services for a client for which the individual does not directly receive adequate remuneration for the service provided. Instead the client refers remuneration for the service to a company, trust or other non-individual entity. The entity then distributes the income to a SMSF, of which the individual is a member, as a return on investment,” Mr O’Halloran said.
“We are currently reviewing a number of SMSFs that may be involved in this arrangement and will continue to engage directly with taxpayers and their advisors where we have concerns,” he said.
The ATO encouraged taxpayers who have entered into these types of arrangements to seek a private ruling or make a voluntary disclosure to the ATO.
The Budget seems to have confirmed my cynical views but I would have preferred to be wrong.
They now have $127M new money to spend… wasting more public officers time and taxpayers money
Dr Terry Dwyer, if you want people to take you seriously, you have to remain rational. You are slipping into rant mode now.
Maybe the warning should be “Do not save. Do not use an SMSF or super at all. You are sure to stuff up. We have wiped out the lifetime savings of some people with excess non concessional contributions assessments. Maybe we can change the law again and think of new tax traps for your savings. Just give up now.”