The ATO is reminding self-managed super funds (SMSFs) of the rules regarding non-arm’s length income from trusts.
The non-arm’s length income rules can apply to investments, transactions and other arrangements undertaken by SMSFs when the terms of the relevant investment, transaction or arrangement are uncommercial in nature.
If income is distributed from a discretionary to a SMSF beneficiary, it is:
– automatically deemed non-arm’s length income of the SMSF (regardless of the nature of the dealings of the relevant parties)
– taxable at the highest marginal tax rate.
Income received by a SMSF that is a fixed entitlement to trust income is also non-arm’s length income if it is:
– income from a scheme where the parties were not dealing with each other at arm’s length
– more than the SMSF might have expected to derive if the parties were dealing with each other at arm’s length.
If you are unsure whether income from trusts is considered arm’s length income, contact our office.
When it comes to protecting your nest egg, avoid getting caught out by a promoter of an illegal early release super scheme.
Early release super scheme scams will involve a promoter contacting you and offering to help you access your super early. They usually target individuals under significant financial pressure or those who are not knowledgeable about super laws and the repercussions and penalties involved in illegally accessing your super.
You can only access your super when you meet a condition of release.
Generally, when you:
– Are 65 years old (even if you have not yet retired).
– Reach your preservation age and retire.
– Reach your preservation age and begin a transition to retirement income stream while still working.
There are special circumstances where you may be able to access your super early.
These special circumstances include:
– Severe financial hardship
– Temporary or permanent incapacity
– Compassionate grounds
– Temporary residents leaving Australia
– Super death benefits (inheriting super)
– Super less than $200
– Terminal medical condition
To avoid falling for an illegal early super release scam, be wary if the promoter:
– charges high fees and commissions;
– requests identity documents;
– claims you can access your super and put the funds towards whatever you wish;
– and tries to persuade you to transfer or rollover your super from your existing fund to a self-managed super fund (SMSF) in order to access your super before you are legally entitled.
