ATO warns on SMSF tax compliance
A growing number of self-managed superannuation funds (SMSFs) have moved into the pension phase and the Australian Taxation Office (ATO) is concerned that trustees are finding the income tax areas of such arrangements confusing.
At the same time, the ATO has flagged that the Commissioner may utilise his administrative powers to help overcome confusion associated with the delays in finalising the draft ruling dealing with commencement of superannuation income streams.
ATO assistant commissioner for superannuation Stuart Forsyth this week told a conference of retirees that an increasing trend had emerged with respect to SMSFs entering the retirement phase, and that while for the year ended 30 June 2010, 66 per cent of SMSFs were solely in accumulation phase, the remainder were making pension payments to members.
However, in explaining the income tax arrangements around SMSFs paying pensions, Forsyth said they could claim an exemption from income tax for earnings and capital gains from assets that were supporting the payment of a pension to a member.
As well, he said that over the past few years the ATO had noticed a significant increase in tax losses carried forward, and while some of these could be attributed to current economic conditions, the ATO was seeing a significant number of funds in partial pension phase offsetting other income against these losses.
Forsyth also pointed to the fact that there appeared to be continuing confusion around non-arm's length income, with the ATO finding that some SMSFs were still not reporting such income using the correct label, and therefore not paying the correct amount of tax.
"You can expect to see more activity from us in this area, including more litigation," he said.
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