Speaking at the SMSF Association’s national conference in Adelaide last week, ATO assistant commissioner Kasey Macfarlane said it is important fund assets are clearly distinguished as such, and that legal ownership of those assets is correctly recorded in the fund’s name.
“We have seen real-life cases where that hasn’t occurred, and legal ownership of shares, for example, hasn’t been correctly recorded in the fund’s name, and there’s been personal debts,” said Ms Macfarlane.
“A lender has taken action to recover those personal debts and because the fund assets haven’t been recorded properly, the trustee has been required to sell those fund assets to satisfy the personal debts.”
This not only has an impact on the member’s retirement savings, she explained, but also means a breach of superannuation laws, which also potentially brings with it further financial issues in terms of administrative penalties and other compliance actions.
Ms Macfarlane said while poor records of assets on its own isn’t something the ATO would typically look to take compliance action against, it is important practitioners and their clients think about the broader context and purpose of those particular rules and why they are actually there.
“They are rules that are there not just regulation for the sake of regulation, but they are actually designed to protect the fund’s assets, and effectively protect member’s retirement savings,” she said.
She also cautioned that there are different state and territory laws around recording titles or assets.
“There are also different laws around lenders protecting their security interests and then enforcing those security interests,” she said.
“You need to make sure that you’re comfortable within the context of those broader laws that the way that the asset is actually recorded is going to be sufficient to protect the fund’s assets, because the last thing we want to see is assets being lost out of the fund [because] of something that could have been taken care of relatively easily.”
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[quote name=”Lord Stockton”]Yet another example of why there should only be corporate trustees for SMSFs. For the sake of $500 (est ) to set up & ongong fees of $46 this year. Would solve a lot of problems for the ATO & auditors.[/quote]
I would have thought that if the Trustee was going to purchase assets or pay expenses in the wrong name it wouldn’t matter what sort of Trustee the SMSF had.
Most mistakes come down to a lack of knowledge or an honest mistake made by using the wrong bank account. A corporate Trustee won’t change this.
BTW I do agree that a corporate Trustee is preferable, just not for the above reasons.
Yet another example of why there should only be corporate trustees for SMSFs. For the sake of $500 (est ) to set up & ongong fees of $46 this year. Would solve a lot of problems for the ATO & auditors.