ATO alert: SMSF compliance risks with asset protection schemes

Certain schemes involving asset protection arrangements are on ATO radar as they present a compliance risk for SMSFs. The schemes concerned with claim to protect SMSF assets from creditors by mortgaging them to an asset protection trust, commonly called a ‘Vestey Trust’.

The arrangement also involves:

• the execution of a promissory note by the SMSF
• the lodgment of a caveat by the trust
•  optional transfer of fund monies to a bank account in the name of the trust.

If trustees of SMSFs enter into these schemes they may contravene one or more super laws, and penalties may apply. If trustees are already involved in one of these schemes and think it contravenes the super laws, they should make a voluntary disclosure. The ATO will take this into account when determining any compliance action.