Lately, there has been a lot of loose talk about SMSFs and how they are a used as a vehicle to avoid tax. Unfortunately, those talking about the issue are either way too ignorant or have their vested interests. Some are just using this avalanche of brickbats to vent their angst; after all, the SMSF wave hit the aspirations of many industry funds hard. So, all things said, is there any truth in the allegations? Are SMSFS not paying enough tax? Let us find out what an article on the Australian Financial Review has to say.
SMSF is a vehicle for tax avoidance, is it?
Whenever there has been talk about tax avoidance, the question of franking credits has always jumped in. Truth be told as it is, franking credits does not lie exclusively within the domain of the SMSF trustees. Trustees of each and every super fund have access to these credits and in quite an equal proportion at that.
SMSF and Super pension
Many detractors have also contested that SMSF does not pay sufficient taxes. It is well known that self-managed Super funds have high running costs, and this is why those with nearly $200,000 in the kitty usually go for it. This makes these funds the favourite hunt of the elderly investors. To extend, these are the kind of people who have a lot of their assets supporting Super pension and, hence, the earnings are tax-exempt.
If, one fine morning, the SMSF members decided to take all their money to other Super funds, they will be eligible to same kind of tax exemptions. Myth busted!
You can read the original article here.
Point really well made by the article!
Trustees do not want to give ATO a look in
I would like to think about it all from one different angle, too. Because the money involved is higher and because the SMSF trustees are generally an older lot, they themselves do not want ATO to get involved. So, they take every possible step to stick to the law. It is common knowledge in the SMSF circle that auditors finding any tax misappropriation can report it to the ATO via the Auditor Contravention Report (ACR), and this is exactly what the SMSF trustees look to avoid.
The investment world will be a lot better place if people were to assume responsibility for all that they say. Sadly, this has not been the case in regards to SMSF criticism.