The ATO has issued a warning to SMSF trustees and members to avoid a range of schemes, emphasising the features that identify them and the potential harm that may arise from taking part in them.
In an update on its website, the regulator stated key warning signs of a scheme that would attract its attention involved illegal early release and tax avoidance via an SMSF.
Additionally, common features of a scheme included artificial or contrived arrangements with complex structures around a new SMSF, unnecessary steps or transactions, and claims that sound ‘too good to be true’.
The ATO added there were risks involved with many schemes and individuals may be targeted to start an SMSF or to use an existing fund in inappropriate and illegal arrangements to get a present-day benefit for the individual or a different party, or to steal superannuation from the individual.
Other drivers for schemes were to convince someone to move their superannuation to an SMSF so they can access it before a condition of release is met or to convince someone to invest their super money into a fraudulent investment.
“Avoid making an investment that could result in illegal consequences by seeking financial advice from a registered financial adviser in relation to setting up an SMSF or about investments,” the update stated.
“Before establishing an SMSF, take time to educate yourself about the rules and responsibilities as a trustee, including reviewing our SMSF education products. You should also check the MoneySmart Investor Alert List o see if the investment or promoter has been flagged as a potential scam.”
While the update noted there were a range of SMSF-related schemes to be aware of, many of them related to property, including residential property purchased through an illegal SMSF scheme.
The ATO stated these schemes often target first-home buyers looking to purchase a house and land package.
“These schemes are established and promoted to look like a genuine SMSF investment to help individuals purchase a home. However, they often contravene one or more of the super laws, which may give us reason to view the SMSF as a ‘sham’ and not a legitimate super fund, providing a member with a current-day benefit, and set up and maintained in a way that doesn’t comply with the sole purpose test,” it said.
“The arrangement may also involve the illegal early access of super benefits by members, giving of financial assistance to a member using the resources of the fund and provision of a ‘loan’ to a member to help them buy a home.”