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ASSET PROTECTION SCHEMES PUTTING SMSF COMPLIANCE AT RISK

26 January 2023

The Australian Tax Office (ATO) has identified certain self-managed super fund (SMSF) asset protection schemes as being on their radar.

 

The schemes that they are on alert for claim to protect SMSF assets from creditors by mortgaging them to an asset protection trust, commonly called a ‘Vestey Trust’.

According to the ATO, features of these schemes can include:

 

· The execution of a promissory note by the SMSF

· The lodgment of a caveat by the trust

· Optional transfer of fund monies to a bank account in the name of the trust.

 

Why the danger?

 

The ATO has stated “if trustees of SMSFs enter into these schemes they may contravene one or more super laws, and penalties may apply.”

 

Is it worth the risk?

 

No. It’s not worth the risk, nor is it necessary. The ATO highlights that the super system already does protect SMSFs from creditors, so these schemes put funds at unnecessary risk.

 

What should you do?

 

If you think your SMSF is already involved in such a scheme, take action now and notify the ATO. They will take voluntary disclosures into account when determining any compliance action.


For more information visit the ATO website

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