The AAT has upheld the Commissioner’s decision to include in a taxpayer’s assessable income money withdrawn from a self-managed super fund (SMSF) in breach of the payment standards in the SIS Regulations. The taxpayer had withdrawn from her SMSF 4 amounts totalling $62,500 to complete the purchase of a home after she had been made redundant from her job as a bookkeeper. Following an audit, the Commissioner issued an amended assessment including the $62,500 in the taxpayer’s assessable income under s 304-10(1) of the ITAA 1997.

In upholding the amended assessment, the AAT rejected the taxpayer’s attempt to instead classify the withdrawn amounts as a “loan” by the SMSF to herself. The AAT found the taxpayer had only claimed that a loan existed after her fund was audited and found to be non-compliant.

The AAT also dismissed the taxpayer’s claim that she was entitled to withdraw the money under 1 of 4 conditions of release in regs 6.17, 6.18 and Sch 1 to the SIS Regulations. The AAT held that the taxpayer did not qualify for the early release of her superannuation benefits on either compassionate grounds, severe financial hardship, retirement or attaining preservation age. The AAT observed that the early release of benefits on compassionate grounds under reg 6.19A(1)(b) is a very restrictive test as it requires the prior existence of a mortgage on a residence and the consent of the Regulator to release a single lump sum to prevent foreclosure.

The AAT also upheld the 25% administrative penalty on the tax shortfall after ruling that the taxpayer had not exercised “reasonable care” in relation to her income tax return.

(AAT Case [2013] AATA 855, Re Xu and FCT, AAT, Ref No: 2013/2007, Letcher SM, 2 December 2013.)

[LTN 234, 3/12/13]


About the author