PwC director of private clients Liz Westover said SMSF practitioners or trustees who are thinking about setting up two SMSFs essentially to try and circumvent the segregation rules should be very careful about the decision-making process around that.
“If you are doing it purely for tax purposes, you might have a part 4A issue,” said Ms Westover.
This isn’t to say a trustee can’t set up two funds, she said, but there must be other reasons as to why they’re doing that.
“So don’t set up two funds to try and have one $1.6 million pension account and one other account,” she said.
“If it’s purely for tax you might have a part 4A, and the Tax Office will be looking at you.”
I would have though a very reasonable condition is wanting to have different long or short term investment outcomes for members for each of their pension and accumulation balances that require different asset allocation strategies. By the way, if the “excess” balance was to be put into an accumulation wrap with its own investment strategy, and the pension kept in the SMSF, would that be seen by the ATO as tax minimisation? Is the focus just on SMSF?
How can setting up a separate $1.6M fund be for tax minimization purposes? A crystal ball has not yet been invented that can accurately predict which fund will perform better!!
What is the advantage of a second fund ?