The ATO has effectively ruled, from 1 July 2017, that SMSFs can no longer create most types of reserves or have “unexplained increases” in pre-1 July 2017 reserves. In addition, the ATO has noted that it will closely scrutinise the use of reserves to manipulate the transfer balance cap or total superannuation balance measures.

The ATO has examined whether an SMSF can create the following different types of reserves:

Type of reserve	Can it be maintained by an SMSF?
Administration reserve	No
Investment reserve	No
Operational risk reserve	No
Unallocated contributions reserve/account	Yes – provided the contribution is allocated in accordance with the law
Complying pension reserve	Yes – provided it was established under the pre-2007 rules
Account based pension reserve	No
Self-insurance reserve	No
Insurance reserve	No
Anti-detriment reserve	No (post 1 July 2017)

The ATO’s view has been expressed in SMSF Regulator’s Bulletin SMSFRB 2018/1. SMSF Regulator’s Bulletins are a new ATO product which the ATO will use as an early warning on SMSF related issues that cause it concerns.

To discuss this further or for more information please contact:

Phil Broderick
Principal
Sladen Legal
T +61 3 9611 0163 l M +61 419 512 801
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia
E: pbroderick@sladen.com.au

Melissa Colaluca
Senior Associate
Sladen Legal
T +61 3 9611 0161
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia
E: mcolaluca@sladen.com.au