SMSF Alert: August 2014

Liam Shorte and Richard Livingston highlight key recent SMSF developments.

Key Developments

  • Taxpayer Alert on treatment of property profits as capital gains
  • Warnings on schemes pitched to SMSFs
  • ASIC concerned over unlisted property scheme disclosures
  • Tax Office guidance on death benefit dependents

The alarm bell has been ringing in recent months, with both the Tax Office and ASIC making announcements warning investors about schemes and investments. Property has been an area of focus.

Let’s take a look at the key developments.

Taxpayer Alert 2014/1

The Tax Office SIS Act.

Mr Bambrick also warned SMSF trustees about participating in schemes involving overseas seminars and stripping franked dividends out of private companies.

If you’re ever considering an SMSF scheme, keep in mind that many of them probably don’t work and rely more on the Tax Office not finding out about them. Unfortunately, SMSFs are a focus area, so they probably will and you’ll pay the price.

Unlisted property scheme disclosure

Continuing with the property theme, ASIC have announced the results of a review into disclosures by the unlisted property sector. They found that some funds were failing to adequately disclose risks against benchmarks established in 2012.

The warning serves as another reminder that you need to research these types of investments very thoroughly. You can’t expect that promoters will disclose risks in a user-friendly manner.

Tax office decision on death benefit dependents

Getting away from property, the Tax Office have issued an Interpretive Decision (ATO ID 2014/22) which confirmed that an adult child of a deceased super fund member can be a ‘death benefits dependent’, allowing them to receive death benefit payments tax-free.

A normal ‘child dependent’ needs to be under the age of 18 years, but the Tax Office took the view in this case that the child qualified under one of the other tests – a ‘dependent of the deceased person’ – due to the care they provided to the parent and the financial support given by the parent to the child.

Other recent developments

Members may also be interested in the following:

  1. Tax Office decision on loans by SMSFs to property trusts - The Tax Office issued Interpretive Decision ATO ID 2014/23 which gives an example of when a loan by a SMSF to a unit trust to fund a property purchase would not be treated as an ‘in-house asset’ of the fund.
     
  2. ATO has now released 2 new educational videos - As part of their ongoing education program for SMSF Trustees, the ATO have added two new videos to their YouTube channel: SMSF paying an income stream and SMSF planning for the unexpected (relationship breakdown, incapacity, death).
     
  3. Esuperfund fined by ASIC - The SMSF administrator Esuperfund was fined by ASIC for false or misleading online advertising.

Note: Liam Shorte is an SMSF Specialist Advisor™ with Verante Financial Planning and author of The SMSF Coach.

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