Require specific ATO advice on your SMSF? There’s a form for that
The ATO says it can provide tailored technical assistance for SMSF trustees in some circumstances, orally or in writing, depending on the nature and complexity of their query.
For example, you may need to seek tailored technical assistance if:
- you are not able to find the ATO’s view of how the law applies to a particular technical issue
- you’re not certain how the ATO view of the law applies to your circumstances
- you are seeking greater certainty (protection) than the ATO’s published products provide.
If the contentious issue at hand is about how the Superannuation Industry (Supervision) Act 1993 and Superannuation Industry (Supervision) Regulations 1994 apply to a specific transaction or arrangement for an existing SMSF, you can apply to the ATO for advice to deal with that specific issue.
The ATO says it can provide specific advice about the following topics:
- investment rules including
- an investment by an SMSF in a company or unit trust
- acquisition of assets from related parties
- borrowing and charges
- in-house assets
- business real property
- in-specie contributions/payments
- payment of benefits under a condition of release.
The ATO is at pains to point out that it cannot provide financial advice, and also says it will not provide specific advice if the request relates to the complying status of an SMSF, trustee covenants, or the residency status of an SMSF (but the trustee can apply for a private ruling, as this is a tax issue).
There is a particular form that the ATO requires if you want specific advice about how the super law applies to a particular transaction or arrangement for an SMSF.
You can download this form in PDF format – see Request for self-managed superannuation fund specific advice (NAT 72441, 109KB).
Apart from requiring the use of the above form, the ATO also specifies that it will only provide SMSF specific advice if sufficient details have been provided (and that its decision to decline providing such advice does not have formal review rights).
Required information or documents
The ATO requires particular details if it is being asked to provide advice on the acquisition of assets, or about business real property, or regarding in-house assets.
Acquisition of an asset: If you need the ATO to determine whether the acquisition of an asset by the SMSF is prohibited by the Superannuation Industry (Supervision) Act 1993 (SISA), or whether it meets one of the exceptions, the ATO will need to be provided with:
- documents that show the current or previous (depending on whether or not the acquisition has occurred already) legal ownership of the asset
- details describing the relationship between the party who owns (or owned) the asset and the SMSF
- documents or details about the asset acquired or to be acquired, in particular whether the asset is
- listed shares
- business real property
- an asset described within subsection 66(2A) of the SISA
- details or documents that outline how the acquisition/transaction would occur or has occurred, including the value of the asset and how the value of the asset was arrived at.
Business real property: If you want the ATO to determine whether property meets the definition of “business real property” for the purposes of SISA, the ATO will need:
- details describing the relationship between the party who owns (or owned) the property, or lease, to be acquired for the SMSF or its members
- documents detailing the legal ownership of the interest in the real property and the form of that ownership (such as lease or freehold)
- details or documents that outline how the transactions would occur, or have occurred, including the market value of the asset and how that value was arrived at
- documents explaining or a detailed description of business activities that occur on the property or in a location of which the property is a part
- details of any private or non-business use on the property, including the degree of non-business use, purpose and frequency.
In-house assets: If you require the ATO to determine whether an investment, loan or lease (whether proposed or not) would meet the definition of an “in-house asset” for the purposes of SISA (and whether or not a contravention of the in-house assets rules has occurred), provide it with:
- details or documents outlining the specific transaction – this may include investment, loan and lease documents
- with regard to the investment, loan or lease arrangement, details describing the relationship between all parties and the SMSF
- details or documents that outline how the transactions would occur, or have occurred, including the market value of the investment, loan or lease and how that value was arrived at
- the total value of the SMSF’s assets in the year of income that the transaction has or would occur.
For more information about:
- the acquisition of assets, refer to SMSFR 2008/D2
- business real property, refer to SMSFR 2009/1
- in-house assets, refer to SMSFR 2009/4.
Selling a business? Don’t forget the “going concern” GST exemption
The concept of a “going concern” exemption for the purposes of the goods and services tax (GST) can still cause confusion when businesses are sold.
The sale of a business may be GST exempt if the enterprise is deemed to be a “going concern” — which refers to an enterprise’s ability to continue trading. The ATO says a supply of a going concern occurs when:
- “a business is sold, and that sale includes all of the things that are necessary for the business to continue operating”, and
- the business is carried on, “up until the day of sale”.
The GST exemption has its advantages — a buyer of a business does not have to find extra funds to cover the GST that is added to the purchase price. And while the buyer (if registered for GST) is entitled to get the tax back via the input tax credit system, this cannot happen until some time after the completion of the transaction. It should also be remembered that while the GST will eventually be refunded, any stamp duty that is payable on the sale of a business will include the amount for GST.
What are the requirements for the exemption?
Business owners may be aware of the existence of a GST exemption but not completely understand the way it operates. The GST legislation says that the sale of a going concern will be GST-free if:
- the sale is “for consideration”
- the purchaser “is registered, or required to be registered” for GST, and
- “the supplier and the recipient have agreed, in writing, that the supply is of a going concern”.
The sale of business contract will usually specify that the business (that is, the “supply”) is a going concern when the contracts are exchanged. This is critical, because it shows that all parties to the sale acknowledge that the business is a going concern.
A vendor is required to supply “all of the things that are necessary” for the continued operation of the enterprise. This does not mean everything that is owned by the business. It does however mean those things without which the enterprise could not function. Generally, this includes the necessary assets such as premises, plant and equipment and customer contracts. It can also include arrangements such as ongoing advertising.
The legislation requires the vendor to carry on the business “up until the day of sale”, with the business deemed to be transferred on the date on which “effective control and possession” of the business is handed over to the buyer. While this date generally refers to the settlement date, “the day of sale” may occur before or after the settlement date.
The tax liability risk (in case the ATO does not view the sale as a supply of a “going concern”) ultimately lies with the seller, as the seller is the “supplier” in any transaction that is required to remit GST to the ATO.
Some vendors seek to avoid this tax liability risk related to the business by including a clause in the sale contract requiring the buyer to indemnify the vendor for any GST that may be payable in the event that the ATO does not view the transaction as one of a going concern.