The two additional requirements that have to be met add an additional step to the process of applying for the ABN and TFN.
Taken directly from the application form on the abr.gov.au website, there are two additional questions that have been added to the ABN|TFN application form for SMSFs, which are as follows:
• What is the value of the assets held by the fund?
• Does the fund have governing rules?
If the applicant selects that there are no assets held in the fund, or that the fund does not have governing rules, the application for the ABN and TFN will be refused by the ATO.
What implications do these additional requirements have?
In practice, this means that the ABN and TFN cannot be applied for until the governing rules of the fund have been executed and a contribution has been received by the fund.
The first criteria is straightforward. However the second criteria has caused confusion amongst practitioners, given that members can’t rollover their member balances into the fund until the ABN has been obtained. Therefore, how can a contribution be made into the fund before the fund is allowed to register for the ABN?
Topdocs have been in contact with senior management at the ATO in relation to this aspect, especially in the circumstance where the members may be unable to make a cash contribution to the fund eg. if all members are over the age of 65 and don’t satisfy the work test.
The practical solution to meeting this requirement is where the members are permitted to make a contribution, have one of the members of the fund make a nominal cash contribution to the fund eg. $1. This contribution will be held by the trustees as cash until the bank account has been opened for the fund. Then, when the ABN has been applied for and received by the fund, the cash contribution should be deposited into the bank account of the fund as a contribution by the member.
What if the member is not permitted to make a contribution?
In the situation where a member is not permitted to make a contribution to the fund eg. due to their age, there doesn’t seem to be a clear response from the ATO on how to satisfy the asset criteria. However, the practical reality is that confirmation in the application form that the fund holds an asset should be made notwithstanding in this circumstance, so that the application form with the ABN can proceed, as our understanding is that the ATO will not penalise a fund in doing so in this particular circumstance.
Michael Spakman, director, Topdocs
When governments trumpet that they want to reduce red tape, some bureaucrat comes up with yet another way to complicate matters for no identified benefit
In the situation where an amount used to open a bank account, say $10, could not be recognised as a contribution, it could be recorded as a loan to the fund and recorded as a creditor to be repaid after other funds were rolled in.
The ATO certainly needs to get its act together.
This sort of blockage is just wasteful and irritating
I use the establishment costs as the asset value.
My theory is that receivables are assets. If the members intend to rollover from other funds then a receivable would exist and the fund therefore has an asset.
I think I will die of shock the day I see common sense come out of the ATO bureaucracy.
Who thought this was a good idea or even needed? Obviously someone who has no idea of what happens in the real world of SMSFs and not thought through completely.
Bureaucratic rubbish.
Obviously the ATO ‘consulted widely’ before coming out with this brilliant idea.
How about some common sense like
“will contributions or income be received within 60 (or heaven forbid, 90)days by the trustee?”