SMSF advisers may need to change the method they use to set up new funds in order to comply with the Australian Taxation Office’s (ATO) new registration policy, according to SPAA technical director Peter Burgess.
The regulator’s new policy was outlined in its latest quarterly newsletter and states new SMSFs will not be registered unless the fund has assets in it.
“In the past the ATO has been prepared to register new SMSFs with no assets and they’ve also been prepared to accept returns from funds with no assets, but we’ve now got a change in policy here where they are saying do not register your SMSF until there are assets in the fund,” Burgess said.
This immediately had the potential to cause problems for the superannuation industry as the rollover system in place was predicated on the assumption the fund receiving the rollover was already registered, he said.
Furthermore, Australian Prudential Regulation Authority regulated funds have been instructed not to release any rollovers to SMSFs that are not registered by the ATO.
“What this suggests is that advisers are going to have to start client’s self-managed super funds with a contribution,” Burgess said.
However, employing a procedure like this may in turn be problematic in relation to the contributions caps.
“You may have clients that are maxed out on the contributions caps, so that might be an issue. Now I’m reliably told by the ATO that they don’t issue excess determinations for such small amounts but of course it could lead to a more significant excess if the breach triggers the bring forward rule,” Burgess said.
“It may well be that the easiest thing to do is include a $10 note in the client’s file as a contribution to start the client’s fund.”
In relation to other compliance issues, the ATO has raised concerns over pensions.
Specifically it has noted an increasing number of SMSFs are not obtaining actuarial certificates in order to claim the pension exemption.
“They are also coming across an increasing number of SMSFs that are calculating the exemption incorrectly,” Burgess said.
Those types of errors could be understandable due to problems with asset segregation, he said.
“There is insufficient information available from the ATO or anyone as to how you demonstrate that an asset actually has been segregated. For example, can you segregate a bank account? Can you segregate a property?” he said.
Because of these issues, Burgess said he believed there would be an increase in compliance activity by the ATO with funds that were paying pensions in 2011 along with some clarification as to what trustees needed to do to demonstrate an asset actually had been segregated.
