ATO Assistant Commissioner for superannuation, Matthew Bambrick, told the Tax Institute Annual Superannuation Intensive Conference that the ATO is “concerned that some organisations are promoting arrangements where SMSF assets provide members with a current-day benefit.”
These arrangements can include the use of vehicles such as pooled investment trusts.
“Put simply, an organisation invites SMSF members to invest their fund’s assets in a pooled investment trust type of product where the scheme operator draws a commission and if this condition is met, monies from the trust can be accessed as a loan by the fund’s members.”
Following the release of ATO ID 2014/39 and 2014/40 Bambrick said it was not the intention of the ATO to set benchmarks for acceptable interest rates for SMSF LRBAs.
“What we are likely to do is to apply scrutiny to related-party LRBAs where the terms of the loan, taken together, and the ongoing operation of the loan, aren’t consistent with a genuine arm’s-length arrangement.”
ECPI & minimum pension payment concession
In 2012 the ATO Commissioner set out when an SMSF could continue to claim ECPI even though the minimum pension payment had not been paid. In the speech Bambrick revealed that out of the 242 SMSFs which have applied for the Commissioner’s discretion it has only been granted to 20%. In the 80% of cases which weren’t accepted the funds “did not demonstrate that the factors preventing payment were beyond trustee control.” This included medical conditions which were not sufficiently serious and had no supporting medical documentation, the situation did not affect all the trustees, the error was made by the trustees not a third party or was based on incorrect advice or valuations.
However this is only the cases where the SMSF applied to the ATO, often SMSFs can self-assess for the concession.
“Be careful in this area. It’s surprising how many SMSFs and their advisors carefully plan the sale of assets creating capital gains in the first year the member is in retirement but then forget to pay the minimum pension amount meaning they place at risk the ability to claim ECPI,” said Mr Bambrick.
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