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Compliance & Regulation

Separation of assets a major compliance issue

The recording of SMSF assets under the proper name or entity is an issue the ATO has ranked among its top 10 current compliance problems.

“It [represents] 12 per cent of the total contraventions reported to us and 25 per cent of the total value of contraventions reported to us, so it is actually something that SMSF auditors are reporting to us,” ATO SMSF segment superannuation assistant commissioner Kasey Macfarlane said at the recent SMSF Association 2017 National Conference held in Melbourne.

Macfarlane emphasised how important it was for trustees and their advisers to make sure the assets of an SMSF were recorded in the fund’s name.

“It is actually about protecting the fund’s assets and we do see some very unfortunate cases where assets aren’t appropriately recorded in the fund’s name and they become subject to action by creditors or costly legal action trying to prove ownership, and it just really creates a messy situation for everyone,” she noted.

Macfarlane conceded there were instances where recording the assets in the SMSF’s name could be problematic, but there was a solution at hand for those situations.

“Sometimes too there are some legislative restrictions that mean assets can’t actually be recorded in the fund’s name and what we recommend in that case is just to clearly highlight that ownership by the fund [with the use of] some sort of instrument such as a declaration of trust to clearly document that,” she suggested.

Super Sphere director Belinda Aisbett expressed surprise the separation of assets was a compliance issue ranked so highly by the tax office.

“In practice we rarely see a contravention of [Superannuation Industry (Supervision) Regulations] reg 4.09A namely because of the specifics of that regulation,” Aisbett noted.

She added if an SMSF had a corporate trustee in place, the issue would probably be avoided automatically.

“If you’ve got a corporate trustee, you can’t really fall foul of 4.09A. As long as the investments are in the name of an entity as trustee for the fund, then you really can’t trip up, so it did surprise me that this gets reported a lot,” Aisbett said.

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