SMSFs can be targeted by promoters of tax avoidance schemes, the ATO stated. There are several identifiable schemes trustees should be aware of, including arrangements involving the disposal of shares in a related private company with “substantial retained profits” and franking credits to an SMSF.
In addition, the ATO said trustees should be wary of arrangements involving holiday travel claimed as investment expenses by SMSFs.
“We take firm action against those who knowingly contravene the law, including imposing sanctions under the promoter penalty laws,” the ATO stated.
The ATO has also warned that there are significant consequences for trustees who become a disqualified person.
“If you are a trustee and become a disqualified person, you are not allowed to remain a trustee and must remove yourself immediately. This rule also applies to directors of a corporate trustee of an SMSF,” the ATO stated.
The regulator has also said trustees should seek “good quality advice” from a licensed practitioner who can warn of the financial “pros and cons” involved with establishing and maintaining a self-managed fund.