Using SMSFs to Hide Personal Income

2 Aug 2023

Written by

David Busoli, Principal

Occasionally we encounter situations where a member has arranged for their SMSF to receive shares or options in lieu of payment to them for services they’ve provided.

This triggers a number of unfortunate consequences.

The ATO’s position is that:

  • the general anti-avoidance rules may apply
  • the transaction may breach the sole purpose test
  • the asset acquired might be an excluded asset – particularly if it is a “right” to options or shares or they are unlisted.
  • the asset may be subject to NALI and be taxed at 45% on both its income and growth.
  • administrative penalties might apply.

The transaction must usually be unravelled – a potentially costly procedure.

An SMSF provides significant opportunity and flexibility but is still subject to basic compliance rules. If a proposed course of action seems to bend those rules it should be checked out thoroughly, possibly to the extent of a private binding ruling.

As always, I am available to discuss these matters with our Alliance Partners.

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