The Australian Taxation Office (ATO) has expressed its concern over the use of reserves within SMSFs and pointed out advisers need to consider these strategies carefully before recommending their implementation as they add a potentially unwanted layer of complexity to running a retirement savings fund.
“I often wonder why people complicate their accounting with reserves on events that may never eventuate,” ATO assistant deputy commissioner of superannuation Stuart Forsyth said.
“I think you need to be very careful with that – accumulating a number of reserves you have to account for in the long term around events like the anti-detriment bonus.”
Forsyth explained the tax office only saw value in employing an anti-detriment reserve in particular circumstances.
“There is absolutely no point in making anti-detriment part of your self-managed super fund unless you have income,” he said.
“Most funds in pension phase don’t have any. If you’re making an anti-detriment payment, for most people it makes no sense.
“Having a reserve there will complicate the situation.”
He qualified his statement, saying the decision was up to the advisers and trustees themselves and the regulator was not attempting to be prescriptive on the subject.
“That’s your call. You can do these things. Are they always clever? I’m not sure they are,” he said.
The assistant deputy commissioner of superannuation singled out contributions reserves as another area where caution needed to be exercised. “It’s a bit the same with contributions reserves and these things are talked about quite a bit,” he said.
“They’re complicated, they’re one-off, and they make fund compliance and accounting more detailed for you.”
He emphasised SMSF advisers and trustees needed to keep some perspective when looking at those strategies to properly assess the role they should play within the super fund. “Are they really the main game? No they’re not,” he said.''