Simple mistakes could have dire consequences
By WP | 20/03/2013 12:00:00 AM | 0 comments
The SMSF Professionals’ Association of Australia (SPAA) has raised concerns about draft legislation, which is aimed at tightening acquisition rules for SMSFs and related parties.
The legislation is in response to the Cooper Review, which found that current provisions did not adequately mitigate the risk of SMSFs or related parties illegally benefiting from transaction date and asset value manipulation. The legislation, expected to take effect on 1 July, will change the requirement from; ‘must not intentionally acquire an asset from a related party of the fund’ to; 'must not acquire an asset from a related party’.
SPAA technical director Peter Burgess says this change could have serious consequences for SMSF trustees.
“Removing the word ‘intentionally’ may have important implications for SMSF trustees who may be considered to have breached the related party asset rules even though it was unintentional, especially as new administrative and civil penalties will apply under this legislation,” says Burgess.
The definition of a ‘related party’ creates more complexities and SPAA believes situations could arise where the entity concerned is a subsidiary company further down the chain of ownership.
Burgess says that keeping the word ‘intentionally’ in the legislation would mean that inadvertent purchases of assets from related parties would not be penalised, as well as maintaining an equitable position with APRA-regulated funds.
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