Government Initiative Launched to Eradicate Illegal SMSF Schemes

Project Super Scheme Smart is an initiative by the Australian Taxation Office (ATO) to help protect Self Managed Super Fund trustees from risky and illegal retirement schemes.

The ATO is seeking to raise awareness about illegitimate retirement plans being peddled to trustees. According to the ATO some of these schemes ‘may be cleverly designed to look legitimate, involve a lot of paper shuffling and framed as being designed to give a taxpayer a minimal or zero amount of tax or even a tax refund or concession,’ but ultimately they will have repercussions.

What are these illegal schemes?

These illegal retirement planning schemes seek to minimise or mitigate the tax owed on investment gains through duplicitous and illegal means. By funnelling money through complex structures, these schemes make the returns you make from your holdings unclear and while it may seem you have paid less tax, the consequences for when you’re caught can be significant.

Getting involved in an illegal retirement plan – even if you’re unaware of its illegitimacy – can leave you open to fines, the loss of retirement savings, the removal of your right to manage your own fund or even jail. While the ATO is working hard to shut down any illegal SMSF activity they find, it remains incumbent on trustees to be wary about any offers they receive.

What to look for

The ATO has provided some key features to be wary of when assessing the legitimacy of any scheme. Illegal plans often:

  • are artificially contrived with complex structures usually connecting with an existing or newly created SMSF
  • involve a significant amount of paper shuffling
  • are designed to give the taxpayer minimal or zero tax, or even a tax refund
  • aim to give a present day tax benefit by adopting the arrangement
  • invariably sound ‘too good to be true’, and as such they generally are

You should also be wary of being contacted out of the blue by people offering financial services which will significantly decrease your tax burden. These promoters have even been known to approach financial planners with their services in order to reach their clients and create a veneer of legitimacy. While anyone can fall prey to these schemes, people closer to retirement are more often targeted.

If you suspect that you have been approached with an illegal scheme, or even if you believe you may have been caught up in one, you should contact the ATO on 1800 060 062 or at reportataxscheme@ato.gov.au. They can provide advice and guidance to protect yourself. If you believe have been involved in an illegal scheme, by reaching out to the ATO yourself you could put yourself in a better position to minimise the consequences for you personally.

For more information, make sure to visit the ATO’s Super Scheme Smart website.

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