SMSFs warned on tax evasion with CGT relief
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.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.