The ATO has outlined new and ongoing red flags that determine whether an investigation into a trustee or their fund is warranted.
Speaking at the SMSF Adviser Technical Strategy Day in Brisbane this week, the ATO’s Nathan Burgess said the “best way” to get the ATO’s attention is to not lodge a return.
“Eventually, we have to deal with every non-lodging SMSF,” Mr Burgess said. “You will get attention from the ATO.”
Mr Burgess added that young trustees who appear to have little money and no investment experience will also represent a red flag for the ATO, as will older trustees in single-member SMSFs.
“If we see a 22-year-old just out of uni, we might pay a bit more attention to them at the start,” Mr Burgess said.
If the tax office only ever deals with one trustee in a multiple-member SMSF – that is, there appears to be a dominant trustee – that will cause concerns at the ATO.
“Just a reminder: penalties will not only apply to a dominant trustee or the decision maker, they apply to all of them,” Mr Burgess said.
SMSF trustees who do not have an exit or contingency plan to wind down the SMSF will also be of concern to the ATO, while those who are solely focused on minimising their tax liabilities will also attract attention.
“When it is the only thing someone is coming in for, there is a very good chance the investment doesn’t stack up. They should be thinking about what they want to achieve in retirement,” Mr Burgess said.
Those SMSF trustees who have done the wrong thing are best to “own their mistakes”, he said.
“I’d prefer people not to make mistakes, but when they do, I’d prefer they own up to them,” Mr Burgess said.
“That’s the way to minimise consequences for your clients.
“There are some times where we only find out the background of the case when someone takes us to court. By this stage, we’ve done an audit, we’ve done a review, but they’ve failed to tell us [for example] that they have a son who is ill and have been using their assets for that.
“I can tell you we haven’t lost a court case in a long time," Mr Burgess said. "The court is actually stricter than us. So if you’ve got that information, don’t hold it back from us.
“There’s a few times we’ve had to convince the judge to give a lesser penalty. Don’t roll the dice there – it’s not worth it.”
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