SMSF can be a lucrative option if only you know the few traps that may present themselves along the way and have covered the range of penalties you may be exposed to. When the sun rose on 1st July this year, the tax man wanted the SMSF trustees to have a few things clearly figured out. Till this day, the ATO could mete out penalties to you but, there was no regime in place. Things changed on 1st of July.
ATO’s new regime in place
For instance, you came to know that any SMSF borrowing meant for purchasing residential real estate had to be in sync with your investment strategy. You came to know that breach of the arm’s length of model of transaction could put you in a soup. You came to understand that dividend franking, though allowed, had its rules.
Important to play by the rulebook
Besides, you need to be a lot more careful while separating your personal assets from the SMSF assets. A casual separation won’t do anymore. You need to prepare your returns diligently and not allow your bank accounts to hit a consistent ‘overdraft’ mode. And the next time you feel like extending a loan to a family member through your SMSF, I advise that you think again.
Are you a non-person? What does the ATO think?
Suffering from an identity crisis in life can be tough but it is unlikely to be financially strangulating. Things might not be the same if you are declared a non-person by the ATO. When can this happen? If you have failed to lodge your returns for 2 years in stretch, it is time the ATO will act, declare you a non-person and revoke the contributions, transfers and rollovers that your funds receive. To put it as it is, your funds will become nearly non-operational.
Feel free to get in touch with me if you are finding it difficult to comprehend the new ATO penalty regime. I will be glad to assist.
