The implications of recent TFN and ABN changes for SMSFs
The ATO has recently made changes to the requirements that must be satisfied for an SMSF to apply for an ABN and TFN at establishment – but what does this mean?
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