With a significant number of Australians approaching retirement and looking at the best ways to maximise their retirement assets and income from their super for it, retirement planning makes sense.
Unfortunately, there are those who want to target people approaching and planning for their retirement with schemes designed to ‘help’ retirees and prospective retirees avoid paying tax by channelling their income through a self-managed super fund.
Retirement planning schemes are designed to help people avoid paying tax on the income earned through their assets (often in an illegal manner). Those schemes may seem like a simple get-rich-quick solution in maximising assets and income for retirement but can put people’s entire retirement savings at risk.
Anyone can fall prey to a retirement planning scheme. Anyone who is looking to put significant amounts of money into superannuation can be at risk of being ensnared, particularly those who are over 50, and who are:
- SMSF trustees
- Self-funded retirees
- Small business owners
- Professional service providers
- Individuals who are involved in property investment
Checking for standard features of retirement planning schemes can be an excellent way to avoid becoming tangled in one. Retirement planning schemes usually:
- Are artificially contrived and complex, with SMSF members often targeted and encouraged to use their SMSF as part of the scheme
- Involve a lot of paper shuffling
- Are designed to leave the taxpayer with a minimal or zero tax, or even a tax refund
- Aim to give a present-day tax benefit by adopting the arrangement
- Sound too good to be true – and in most cases, they are.
Currently, there are a number of schemes targeted toward those individuals who currently have an SMSF, as they have a high level of control and autonomy in the way that their retirement savings are invested (subject to applicable tax and super laws).
Some examples of retirement planning schemes include:
- Some arrangements involving SMSFs and related-party property development ventures.
- Refund of excess non-concessional contributions to reduce taxable components
- Granting legal life interest over a commercial property to SMSFs
- Dividend stripping
- Non-arm’s length limited recourse borrowing arrangements
- Personal services income
- Liquidating an SMSF
To avoid becoming a part of a retirement planning scheme, seek professional advice on super or SMSFs from a specialised accountant. You can also:
- Seek professional advice from a reputable source, such as a financial planner, adviser or accountant with proven professional qualifications and/or certifications.