Tax office warns of three dodgy SMSF schemes you need to avoid


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The tax office keeps a close eye on artificial tax schemes.

It has highlighted a trio of arrangements aimed at those who are nearing retirement and have a self-managed super fund.

They should avoid the following:

tax scams to avoid smsf self-managed super ato

  • Artificial arrangements involving SMSFs and property development ventures, involving the creation of complex structures, often including a chain of interposed unit trusts, which result in the income from the property development being distributed to an SMSF, rather than to the individual, and hence subject to a lower rate of tax.
  • Arrangements where SMSF members deliberately contribute an amount beyond their non-concessional contributions cap in order to manipulate the taxable and non-taxable components of their balance when they withdraw the excess.
  • Arrangements where an individual or related entity grants a legal life interest over a commercial property to an SMSF, as opposed to the SMSF obtaining full legal ownership.

This results in the rental income being diverted to the SMSF and taxed at lower rates while the individual or related entity retains legal ownership of the property.

The key features of schemes like these are low (or zero) tax, lots of shuffling of legal paperwork and a general air that they are "too good to be true". (Hint: they are!)

So if somebody approaches you about such a scheme, be sure to consult a trusted adviser.

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Mark Chapman is director of tax communications at H&R Block, Australia's largest firm of tax accountants, and is a regular contributor to Money. Mark is a Chartered Accountant, CPA and Chartered Tax Adviser and holds a Masters of Tax Law from the University of New South Wales. Previously, he was a tax adviser for over 20 years, specialising in individual and small business tax, in both the UK and Australia. As well as operating his own private practice, Mark spent seven years as a Senior Director with the Australian Taxation Office. He is the author of Life and Taxes: A Look at Life Through Tax.