The ATO says it is happy with the response from SMSFs in regards to dividend stripping arrangements.
Early in 2015 the ATO issued Taxpayer Alert 2015/1, raising concerns about potential dividend stripping involving private companies and SMSFs.
Later in 2015 the ATO said it would be contacting some SMSFs which may have been involved in arraignments described in TA 2015/1.
The ATO said that SMSFs which chose to self-amend Annual Returns would not be subject to administrative penalties. This offer expired on the 15th of February 2016.
“While we are happy with the response we have received to date from affected trustees, we believe there may be many more SMSFs that have arrangements in place similar to the one described in TA 2015/1,” says the ATO.
“Many trustees have engaged with us and have self-amended the relevant SMSF annual returns to remove the franking credits received as part of a dividend stripping arrangement. These trustees will receive a letter confirming no further compliance action will be taken in respect of the arrangement.”
“Some trustees contended to distinguish their SMSF from the arrangement contained in TA 2015/1 by providing additional information. Upon review of the information, we have granted them another opportunity to consider the Offer where we believe their arrangement is substantially similar to TA 2015/1.”
The ATO said there are “a number” of SMSFs which the ATO believes have had dividend stripping arrangements in place but have decided to not take up the ATO’s offer.
“We have since advised them that in order to evaluate their arrangements we will commence compliance action on the SMSF and its associated entities.”
“We recognise some arrangements may look right and trustees think the advice they have received is sound, but there may still be underlying problems such as those identified in TA 2015/1.”
“We don’t believe trustees should be harshly punished when they think they have done the right thing.”
“Trustees who are uncertain about the arrangements they are involved in are encouraged to engage with us and, if necessary, seek an early resolution to any dispute. Consideration will be given to reduced penalties in accordance with our remission guidelines.”
The ATO says the “vast majority” of advisers are providing “excellent service” to their clients, but that advisers promoting dividend stripping, or similar, arrangements “will leave themselves open to the possibility of prosecution under the promotor penalty laws”.