AAT Decisions

Administrative Appeals Tribunal (AAT) decisions

SMSF trustees penalised for sham loan involving SMSF

Administrative Appeals Tribunal (AAT), SMSF trustees, penalties, sham loanTwo SMSF trustees have been penalised for a sham loan involving their superannuation fund, in the ruling Morrison and Commissioner of Taxation [2015] AATA 114 (27 February 2015)*.

The ruling describes how the taxpayers wished to purchase an apartment, for which they would need to borrow. They could obtain $600,000, half the amount required, from an Australian bank. They asked their accountant and financial adviser for help. He told them they could obtain a loan from the Hua Wang Bank Berhad, incorporated in Samoa. The tribunal was informed that, under the terms of the licence, the bank was only authorised to deal with clients of the accountant.

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Early access to super: ‘fee’ included in assessable income

AAT - Early Access to SuperannuationThe Administrative Appeals Tribunal (AAT) has released another decision which shows that it does not pay to participate in superannuation early access schemes.

The decision of Vuong and Commissioner of Taxation [2014] AATA 402 (23 June 2014) following the ATO disallowed two objections by the taxpayer in relation to an early access scheme they participated in, including a significant ‘fee’ paid to the promoter.

Summary of the facts:

  • The taxpayer was aged 49 in 2008
  • He was a member of a large APRA fund
  • In 2008 he was referred by colleagues to a person who offered to help him access his super
  • The fee for this ‘service’ would be 29% of the balance
  • It appears that the taxpayer did not properly understand that this was not allowed
  • Rollover forms were submitted to the APRA fund, and as a result $114,697.23 was deposited into a bank account not controlled by the taxpayer
  • The 29% fee was taken, and the remaining $81,434 transferred to the taxpayer
  • Questions were raised by the taxpayer’s tax agent, and the tax return for the relevant year was lodged, with the intention of amending it when the facts were known
  • In 2011 the ATO audited the taxpayer, and included the full $114,697.23 in his assessable income, resulting in a tax shortfall of $45,298.64.
  • The ATO also imposed  a shortfall interest charge of $2,896.46.
  • The ATO later imposed an  administrative penalty of $11,324.65 – 25% of the shortfall
  • The taxpayer lodged two objections – one over the imposition of the administrative penalty and the other over the wish to claim the 29% ‘fee’ as a tax deduction
  • Both these objections were disallowed by the ATO, and then appealed to the AAT

Early Access Super included in Assessable Income?

Section 6.1 of the ITAA 1997 includes in Assessable Income amounts that are not Ordinary Income, called Statutory Income. Section 304.10, also of the ITAA 97, includes in Assessable Income the amount of a Superannuation Benefit if, among other things, the taxpayer receives a benefit from a complying superannuation fund where the benefit was received “otherwise than in accordance with payment standards prescribed under subsection 31(1) of the Superannuation Industry (Supervision) Act 1993″ unless the Commissioner “satisfied that it is unreasonable that it be included”. Section 307.15(2) of the ITAA 97 also provides that:

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Disregarding Excess Non-Concessional Contributions

SMSF & Superannuation Rulings, Decisions, Cases and DeterminationsFollowing shortly after the announcement in the 2014 Federal Budget that there would be a change to allow for excess non-concessional contributions could be refunded from an SMSF comes a case from the Administrative Appeals Tribunal (AAT) showing when such a change would benefit SMSF members.

In the case of Thompson and Commissioner of Taxation [2014] AATA 339 (29 May 2014) the decision asked to be reviews was if the Commissioner of Taxation had acted correctly in not disregarding excess non-concessional contributions.

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