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Superannuation Technical Update: Review of Trust Distributions to SMSFs – April 2016

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The ATO have announced they are currently reviewing self-managed super funds (SMSFs) that have received trust distributions where the income diverted into these SMSFs appears to be non-arm’s length and utilise tax concessions.

The ATO’s focus is on complex arrangements between related entities in a private group that result in large capital gains or inflated income being distributed to SMSFs (sometimes via a chain of trusts). Legislation is in place to prevent this from occurring and non-arm’s length income should be taxed at the top marginal rate rather than the 15% concessional rate. Further, non arms length income is excluded from 0% tax treatment where SMSFs are in pension mode.

TAG recommends you check your clients super records to ensure their SMSFs are meeting their income tax and super obligations. The ATO allows Trustees to notify them of previously incorrectly reported non-arm’s length income in a SMSF annual return by making voluntary disclosure.

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