SMSF trustees and advisers should be aware of dividend washing rules introduced to parliament last week, according to the SMSF Professionals’ Association of Australia.
Speaking to SMSF Adviser, SPAA’s senior manager, technical and policy, Jordan George, said the legislation prevents dividend washing practices where an investor sells and reacquires the same interest to obtain the benefit of a franking credit twice.
“We do not think the vast majority of SMSFs will be caught by the legislation as we have little evidence of SMSFs undertaking this type of dividend washing transaction,” said Mr George.
“Dividend washing needs to be facilitated through a specialised com-dividend market, which most SMSFs would not have access to. Further, most SMSF trustees have a longer-term perspective on their investments than just tax arbitrage.
“However, as it applies generally to taxpayers investing in shares, SMSF trustees need to be aware of the legislation.”
Mr George noted the legislation carves out small investors who have received under $5,000 in franking credits in an income year - this is only limited to individual investors but not SMSF trustees.
“So while SPAA does not expect the vast majority of SMSF trustees to be affected by the legislation, trustees and their advisers need to be aware of the legislation. This is especially the case if they have strategies in place that are aimed at attaining franking credits from a dividend washing strategy,” Mr George said.
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