Michael Hallinan, Townsends Business & Corporate Lawyers special counsel for superannuation, said since the introduction of ATO ID 2014/39 and ATO ID 2014/40 in December it is still unclear what SMSFs with these non-commercial arrangements can do and in what time frame these arrangements must be addressed.
“What can they do? Do they restructure them? Remove the offending elements in the hope that the ATO will accept the loans are commercial for the current financial year,” Mr Hallinan told SMSF Adviser.
The ATO needs to provide an accompanying statement specifying if this is the treatment of non-commercial borrowing arrangements from this point forward or if this treatment will also apply to preceding financial years, he said.
“There was no guidance from the ATO as to whether there is a grace period, or if it needs to be fixed up by a certain date, or if you fix it up in respect to this current financial year or that they’re not going to look at previous financial years,” said Mr Hallinan.
“There were no transitional arrangements – there should be a grace period to allow adjustment.”
Mr Hallinan said comments from the ATO prior to the interpretative decisions had been “very favourable to these types of arrangements”.
“The IDs released in December represented a 180 degree turnaround in attitude from the ATO from statements it made two years ago,” he said.
Michael, spot on as always. Very frustrating for people to be told by a very powerful (and sometimes apparently vindictive) government department “Look, we’ve changed our minds. If you’ve done this you’re in breach and the penalties can be quite significant. You’ve been warned. That is all.” Given how long it takes for the ATO to come out with a lot of its interpretive decisions it seems they could take that little bit longer and think through (and publicise) the downstream effects.