ATO warns SMSFs on franking credits scheme

The tax office has warned members of self-managed super funds against claiming franking credit benefits by channelling dividends from shares in private companies through SMSFs.

The ATO last week issued taxpayer alert TA 2015/1 warning SMSF members against the practice.

According to the ATO, this occurs when a member of an SMSF with interests in a private company transfers their interests to an SMSF and then distributes retained profits and franking credits through the SMSF.

The SMSF then claims the franking credit tax offset, resulting in the tax paid by the company being refunded directly to the SMSF, which can then be distributed to the member tax-free.

“We are closely scrutinising SMSF members suspected of avoiding their tax responsibilities by channelling company profits through their SMSF,” ATO deputy commissioner Tim Dyce said.

As a result of this activity, the ATO will also consult on the application of relevant anti-avoidance provisions and consider a public ruling on such arrangements.

The ATO believes SMSF members approaching retirement age are more likely to get involved in these schemes because profits from shares are tax-exempt since they are treated as supporting the payment of pensions.

Regular taxpayers involved in similar arrangements should review their taxation affairs and consider seeking independent advice, the ATO also stressed.

“The ATO may undertake compliance activity seeking to apply the taxation and superannuation provisions, including anti-avoidance rules to such arrangements,” Mr Dyce said.

“We encourage SMSF members who think they may be involved in such arrangements to contact us and make a voluntary disclosure or seek a private ruling from us.

“In our actions, we will engage with affected SMSF trustees and members to develop pragmatic options to address the tax and superannuation consequences of the arrangement.”

Monday, 04 May 2015
Staff Reporter
www.accountantsdaily.com.au

Cristy Houghton

Embarketing, 48 Johnston Street, Wagga Wagga, NSW, 2650

Cristy's unique career has taken her from country NSW to the city lights of Clarendon Street South Melbourne and back again. With an early career in radio as a copywriter and creative strategist, she is now a Jill of all trades as a graphic designer, website builder, blog writer, video editor, social media manager, marketing strategist and more. 

In fact, give her any task and this chick will figure out how to do it! Go on, we dare you!

No, really, we DARE you!!

Cristy has won two Australian Commercial Radio Awards (ACRAs) for Best Ad and Best Sales Promotion, and even has an 'Employee of the Year' certificate with her name on it.

Cristy and her husband James have traveled extensively through Russia, China and South East Asia, and have two fur-babies, Sooty (cat) and Panda (puppy). Cristy loves drinking coffee, meeting people to drink coffee, coffee tasting and coffee flavoured cocktails. She also enjoys road trips, TED Talks and watching cat videos on youtube.