The complexities continue in this area of the law. For example, in recent weeks;
- The Australian Taxation office (ATO) has warned Trustees of any SMSF to take care when considering investing in the property market through their fund, in particular in respect to products being promoted by lending institutions often called ‘limited recourse’ or ‘non-recourse loans’. ATO is concerned about arrangements that do not comply with Superannuation laws and we have seen several recent examples of this. Obviously if a purchase has been completed and the loan arrangements do not comply with the law, the arrangement cannot be simply rectified. Apart from the prospect of losing otherwise favourable tax treatment and adverse tax or stamp duty consequences, the only way out could be a forced sale of the asset and subsequent losses.
- Issues surrounding/exceeding the limited Salary Sacrifice/Superannuation contributions or the timing of such contributions have been the subject of recent Administrative Appeal Tribunal decisions. The cases are instructive and highlight the need for individual fund SMSF members to check on the timing and the amounts of their super fund contributions/salary sacrifices to avoid adverse consequences.
- As a result of substantial lobbying to government, it has been proposed that a “fairer administrative penalty regime”‘ for trustees of some contraventions of Superannuation law be introduced. Policy dictates that it is appropriate to give ATO other methods of encouraging recalcitrant trustees to remedy breaches quickly, rather than relying on the existing heavier handed enforcement procedures. ATO suggests a power to issue “‘rectification or education directions”‘ for various breaches, the latter requiring trustees to undertake a specified approved course of education to ensure compliance with Superannuation law.
As always, these matters clearly show that establishing and operating a successful SMSF is no easy matter and careful consideration and advice needs to be taken at all times. For any further assistance in this area, contact Chris McClure or any of our Commercial Law team members.