ATO levy not paying its way

The levy raised by the Australian Taxation Office (ATO) to pay for its regulation of self managed superannuation funds has not been achieving its cost-recovery objective, according to a report by the Australian National Audit Office.

The report, tabled in the Parliament late last month, said the levy had been introduced in 1999-2000, but there were a number of indicators that it had not been operating on a cost-recovery basis.

“Specifically, the expenditure on SMSF regulatory activities has never been commensurate with levy revenue,” the ANAO report said.

It said the levy was not tied to the ATO’s funding base and the ATO had not complied with the reporting requirements set out in the Australian Government Cost Recovery Guidelines for cost recovered revenues.

The ANAO report said the absence of an effective cost allocation system had inhibited the ATO’s capacity to accurately determine its regulatory costs, and the levy rate of $45 had not been adjusted despite changes in the cost of regulation.

The report noted that in early September last year the Government had announced the levy rate would be increased to $150 per fund per annum to cover the increased costs of SMSF regulation — something that was detailed in the ‘Simpler Super’ package.

“The ANAO considers that, for the Tax Office to fulfil its obligations, it should undertake steps to determine if the levy will operate on a partial or full cost recovery basis and develop arrangements with Treasury to regularly review the levy rate,” the report said.

The ANAO then went on to raise some questions about the manner in which the ATO reported SMSF assets.

“There are large numbers of SMSF trustees that do not lodge their fund income tax and regulatory returns on time or at all,” the report said. “For this reason, the Tax Office derives an estimate of SMSF assets using return forms that have been lodged,” it said.

“The ANAO considers the reliability of the Tax Office methodology for estimating SMSF assets could be improved by incorporating ‘inactive funds’ information currently recorded on other Tax Office systems and by comparing original estimates with actual lodgement data when this becomes available.”