Super experts divided over whether ATO needs to provide more information on improving properties through DIY funds

Super experts are divided over whether the Australian Taxation Office needs to provide more information about the improvement of property through DIY super funds, after the Tax Office was warned that some funds risked big fines for breaching complicated borrowing rules.

According to the Australian Financial Review, industry group the SMSF Professional Association of Australia has urged the Australian Taxation Office to provide further examples of the difference between repairs and improvements, arguing super funds risked fines of up $220,000 for inadvertently breaching limited-recourse borrowing rules.

“The more examples you can provide to help practitioners and members, the better because if you don’t, there may be a higher risk of breaches and there also will be private ruling requests made to the ATO,” SPAA national technical director Peter Burgess is quoted as saying.

The comments come two months after the ATO permitted SMSF members to fund changes to the property, on two conditions: the money comes from their fund rather than borrowings, and do not fundamentally change the asset’s nature.

But Michael Davison, senior policy adviser of superannuation at CPA Australia, says the ATO has already given its views, and those views are clear.

“Some people want guidance on every possible scenario,” Davison says.

“But the reality is, you’re not going to be able to document every single scenario.”

Davison agrees some of the uncertainty is likely driven by the newness of the practice. “It’s going to take awhile to get the hang of it and fully understand it.”