AAT appeals have limited SMSF value
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Darin Tyson-Chan is a journalist with InvestorDaily, a Morningstar publication.
Self-managed superannuation fund (SMSF) trustees may have the ability to contest tax rulings regarding non-compliance notices with the Administrative Appeals Tribunal (AAT), however the possibility of achieving a successful outcome is unlikely, a specialist lawyer said.
DBA Lawyers principal Daniel Butler cited several instances where an appeal had been made to the AAT challenging a non-compliance notice issued to an SMSF, all of which were turned down.
These included well-known cases such as JNVQ v Commissioner of Taxation, where the fund was deemed non-complying due to the presence of an in-house asset that accounted for 95 per cent of the fund's total assets, and Triway v Commissioner of Taxation, where one member illegally accessed the assets of the fund and the remaining trustees covered up this action.
"There's only been one successful [non-compliance notice] appeal - XPMX (XPMX v Commission of Taxation), and why did they get that and what was the key to their success?" Butler asked.
"It was based on an ATO [Australian Taxation Office] error. The ATO issued its non-compliance notice on the basis of s42 of the SIS (Superannuation Industry Supervision) Act when it should have used s42A," he explained.
"So they got off on a mere technicality."
But while the success rate of non-complying appeals has not been high, Butler recognises the AAT has a purpose of being a good forum in which to engage the ATO in a discussion about its decisions.
"Once we get the non-compliance notice the ATO is deadlocked in its position and the only way we can get some sensible dialogue is to get it in the AAT," he said.
"When this happens we as lawyers can have a much better discussion, whereas beforehand you're a part of the bureaucracy and trying to talk to someone then could be very hard. The attitude is, 'We've made a decision and that's it. No further discussion.'"