ATO Targeting SMSF Tax Avoidance

Even though only a handful of cases are currently being investigated, the Tax Office believes the strategy could become more widespread and is undertaking reviews over the coming months.

Consultants and contractors often receive a personal services income (PSI) which is paid via a trust, partnership or company for legitimate tax advantages. PSI is common in ATO targeting SMSF tax avoidance professions such as finance, IT, engineering, construction and medicine, as it is distinct from salary income paid by an employer.

The ATO had become aware of instances where PSI was placed into an SMSF so that the income was either exempt from tax or taxed at a concessional rate rather than the individual’s full marginal tax rate.
The Tax Office has released a statement that seeks to make it clear that individuals who are minimising or avoiding paying income tax by directing their earnings into their SMSF are breaching the law.

The ATO is urging individuals and trustees to come forward before 31 January 2017 to have administrative penalties remitted in full. However, shortfall interest charges will still apply. Individuals will be addressed on a case-by-case basis, but the individual’s co-operation will be taken into account when determining the final outcome.

For more information please contact:

Philip MacIsaac
Director – Taxation
P +61 3 9608 0157
E pmacisaac@moorestephens.com.au