SMSFs planning to backdate documents, so that large unrealised capital gains form part of a fund’s segregated current pension asset pool before 9 November 2016, have been warned they could face bigger issues than just Part IVA concerns.
DBA Lawyers special counsel Bryce Figot says the ATO has already flagged that arrangements where an individual causes an asset with large unrealised capital gains to form part of a fund's segregated current pension asset pool before the pre-commencement period, and causes it to revert to accumulation phase during the pre-commencement period, as a “scheme of concern”.
Mr Figot said funds undertaking these types of arrangements could be facing compliance risks beyond just the potential application of Part IVA of the Income Tax Assessment Act 1936.
“The question will then be, well, why did you want to take these steps? I suspect you’ve probably got bigger problems because it’s probably more along the lines of tax evasion,” he said.
“How did you know to do it before the 9th of November 2016? You probably didn’t. I would question if the documentation has been backdated, so essentially are you lying to the ATO. That’s a fairly serious offence.”
Mr Figot said it is also important that funds comply with regulation 8.02B of the Superannuation Industry (Supervision) Regulations, which says that funds need to report at market value.
“[For example], an SMSF has real estate that is a segregated current pension asset, and on 1 July 2016 it was valued at $2 million, it gets re-valued to $3 million and $1.4 million of it is partially commuted on 30 June 2017. Is this Part IVA? It’s probably not Part IVA, but there may be other concerns,” Mr Figot explained.
“The concern that I [would] have is regulation 8.02B. It’s uncommon for an asset to shoot up 50 per cent in a year, not impossible, but uncommon. If an asset does go up by more than 50 per cent in a year, I wonder was it really $2 million on 1 July 2016 or was it worth more?
“In other words, did you actually comply with the regulation in the SIS regulations which says that you’ve got to report at market value.”
SUBSCRIBE TO THE SMSF ADVISER BULLETIN
- 17 Aug 2017Industry questions ATO’s capacity for new reportingBy Miranda Brownlee
- 17 Aug 2017Qld succession law changes tipped to impact SMSFsBy Miranda Brownlee
- 16 Aug 2017Contribution limits restricting future balances, warns mid-tierBy Staff Reporter
- 16 Aug 2017SMSF firms underprepared for events-based reportingBy Miranda Brownlee
- 15 Aug 2017SMSF auditor disqualified for misconductBy Staff Reporter
- 15 Aug 2017Class gains market share in financial year resultsBy Staff Reporter
- view all
- Industry questions ATO’s capacity for new reporting
With events-based reporting set to generate huge amounts of data, concerns have been raised about whether the ATO’s systems will be able t...read more
- Contribution limits restricting future balances, warns mid-tier
Clients hoping to accumulate a superannuation balance of $1.6 million by age 65 will need to start taking full advantage of concessional con...read more
- SMSF firms underprepared for events-based reporting
A straw poll has revealed that the majority of SMSF firms currently feel their firm is not equipped to deal with the proposed events-based r...read more
- view all