ATO urges caution in selling pre-1999 SMSFs

australian taxation office self-managed superannuation funds SMSFs ATO

17 April 2009
| By Amal Awad |
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The Australian Taxation Office (ATO) has issued a warning that selling pre-1999 self-managed superannuation funds (SMSFs) with a related unit trust may not satisfy transitional rules for certain taxpayers.

In 1999, the definition of in-house assets was amended to include an investment in a related trust, and a transitional period was applied in order to protect prior investments.

The ATO’s warning comes as a result of “arrangements being promoted” that involve selling inactive pre-1999 SMSFs that have control of a related unit trust, and which claim investments made by the SMSF into the related trust before the transition period ends on June 30, 2009, do not have to be included as in-house assets.

“We are aware these arrangements are being promoted and are concerned that taxpayers may be tempted into such arrangements without realising that the transitional provisions may not apply to their circumstances,” said Tax Commissioner Michael D’Ascenzo.

The ATO cautioned that the arrangements “may not satisfy transitional rules as the SMSF may not be continuously maintained to provide retirement benefits to members both before and after the sale of the pre-1999 SMSF”.

The commissioner said this was “a timely reminder for those trustees whose funds are subject to the transitional rules to review the fund’s investments and ensure that their SMSFs will remain compliant after the transitional period ends on June 30”.

The ATO noted that in-house assets are limited to 5 per cent of the market value of a fund’s assets.

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