ATO scrutinises super planning strategies

The Australian Taxation Office (ATO) is set to release guidance on superannuation recontribution strategies employed by financial planners to leverage tax benefits.

ATO deputy commissioner superannuation Mark Jackson says the ATO’s assembled panel on the matter has been considering its relevance to recontributing to superannuation.

“If we saw indications that such a strategy was being adopted purely to produce a tax benefit, then part IVa of the Income Tax Assessment Act may be applied,” Jackson says.

“For instance, if the time between the retirement and the recontribution was of short duration or there were multiple recontributions, then we would be looking very closely at the matter. Likewise, if the individual’s new employment appeared to be contrived purely to enable a re-contribution to occur, then once again, our scrutiny would be attracted,” he says.

Taxpayers Australia national director Peter McDonald says the strategy is quite simple and widely used.

“The law does allow you to take out components. The strategy is about paying your tax up-front then recontributing it back to grow,” McDonald says.

However, he adds some try to squeeze every last advantage out of the process.

Under the present law, the onus is on the ATO to prove that Part IVa tax avoidance exists and this is currently being done on a case-by-case basis.