DIVERTING PERSONAL SERVICES INCOME TO SMSFS

Diverting personal services income to SMSFs

The ATO is currently reviewing arrangements where individuals (at, or approaching, retirement age) purport to divert their personal services income to an SMSF, so that the income is taxed concessionally (or exempt from tax) in the fund, rather than being subject to tax at the individual’s marginal tax rate. These arrangements normally involve the individual’s income being paid to another entity (e.g., a company) which then makes distributions to the SMSF as a ‘return on investment’ (e.g., dividends, where the SMSF holds shares in the relevant company).

WHAT TO DO

The ATO advises any people that have entered into such an arrangement to contact the ATO by 30 April 2017, so they can work with them to resolve any issues in a timely manner, and minimise the impact on the individual and the fund.

Please Note: Individuals and trustees who are not currently subject to ATO compliance action, and who come forward will have administrative penalties remitted in full (although interest may still be payable on any tax collected later than it should have been).

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We experienced first hand the frustration of the ‘old way’ of looking after SMSFs: Financial statements that were out of date by at least 6 months and of no use to anyone other than the ATO, high fees and poor value due to highly skilled and knowledgeable staff spending unnecessary time on laborious data entry and worst of all SMSF trustees not getting the right advice at the right time!