Self Managed Fund Made Non-Compliant
Recently a self managed superannuation fund was made non-complying when it was found to be in breach of the rules. The ATO rarely uses this power that it has and the fact that it has this time (and had its decision ratified by the Administrative Appeals Tribunal) is a warning to all SMSF’s to ensure that they have their house in order.
This is the most serious action that the ATO can take against a fund as it means that the fund loses its concessional tax treatment and the assets of the fund (less non-concessional contributions) are taxed at the top marginal rate.
If that happens, you lose up to almost half of your money in one go!
In this case it was a serious breach where the fund breached the in-house assets rule. Under the in-house rule, a SMSF must not invest, lend or lease to related parties (including members) of the fund more than 5% of its assets. This fund did just that, and did not repay the loan until 4 years later which was 2 years after the fund auditors alerted the trustees to the breach. The ATO does not take action like this lightly and it indicates a hardening of attitude toward trustees who flout the rules.
POSTED: 07-Sep-2009