What is the ATO’s SMSF Compliance Focus?
As the regulator of SMSFs, one of the main roles for the ATO is to help SMSF trustees comply with their obligations under the superannuation legislation and take proper compliance action when they don’t.
The preservation of members’ superannuation benefits until they meet a condition of release is one of these main obligations. And the requirement to ensure SMSF is audited, and an annual return lodged each year.
During the 2023 income year, the results of the compliance action included:
- issuing an additional $29 million in income tax liabilities, administrative and tax shortfall penalties, and interest on SMSF trustees and/or members; and
- disqualifying a total of 753 trustees who have now been added to our public register.
Compared to the previous 2022 income year, double the amount of tax and penalties were imposed and more than triple the amount of disqualifications occurred.
The most common compliance breach was due to members illegally accessing their super benefits before a condition of release had been met. This includes:
- taking lump sums or pension payments when they weren’t eligible; and
- releasing benefits from the SMSF to pay Division 293 Tax or Excess Contributions Tax assessments without making the correct elections and waiting for the release authority to issue, before the SMSF releases the funds.
This compliance focus on SMSFs will continue into the new 2024 income and the ATO has noted it will continue to take firm action should trustees repeatedly fail to comply with their trustee obligations and seriously breach the superannuation legislation.
If trustees do find themselves with a breach the ATO urges them to rectify this as soon as possible. This includes contacting us and/or auditor as soon as you realise the contravention, and there is also the ATO’s SMSF early engagement and voluntary disclosure service available. By not taking action, trustees are risking the complying status of their fund and putting their retirement savings at risk.
Lastly, to safeguard your fund in meeting its annual return lodgement deadline please ensure that you have all the supporting documentation made available to Premier so we can attend to your compliance obligations and keep you safe from ATO action.
Checking for charges over SMSF property assets
It’s not uncommon to see a SMSF own residential property or business real property as part of their diversified investment strategy. However, care must be taken to ensure the property does not have any charges over it any point in time, with the exception of those held via a Limited Recourse Borrowing Arrangement (LRBA).
The ATO has reminded auditors to check for this annually and obtain:
- written evidence from trustees that they have not given a charge over or in relation to the property or other fund assets; and
- by reviewing the:
- property title to check for encumbrances
- Personal Property Securities Register to check for other parties registering interests against other SMSF assets
Audit compliance in the last 12 months have identified that not all auditors have been gathering appropriate audit evidence to confirm assets held by a fund are not subject to charges.
Should your SMSF hold property, please ensure that this legislative requirement is adhered to at all times and that you provide this written evidence to us as part of the annual return preparation process.
Author: Anna Wong – Senior SMSF Manager at Premier SMSF Solutions
*Correct as of 27 September 2023
*Disclaimer – this article has been produced by Kreston Stanley Williamson as a service to its clients and associates. The information contained in the article is for general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this article, it is imperative you seek specific advice relating to your particular circumstances. Liability is limited by a scheme approved under professional standards legislation.
