The ATO is reviewing self-managed super funds (SMSFs) that have received trust distributions. The income diverted into these SMSFs appears to be non-arm’s length and utilise tax concessions.

We are looking at complex arrangements between related entities in a private group that result in large capital gains or inflated income being distributed to SMSFs. This is sometimes done through a chain of trusts. Legislation is in place to prevent this from occurring. Non-arm’s length income should be taxed at the top marginal rate rather than the 15% concessional rate under s295-550(4)&(5) of the ITAA 1997.

Check your clients super records to ensure their SMSFs are meeting their income tax and super obligations. You can notify us of incorrectly reported non-arm’s length income in their SMSF annual return by making a voluntary disclosure.

See also:

[ATO website] [LTN 59, 30/3/16]