The Australian Taxation Office (ATO) last year focused its self-managed superannuation fund (SMSF) compliance investigations on non-lodgements, advice on illegal early release of funds, and audit contraventions, the SMSF Association National Conference has heard.
ATO Assistant Commissioner, SMSFs, Dana Fleming, said that while 86 per cent of SMSFs lodge their returns on time, which was a higher percentage than the rest of the population, many were still missing the mark on this legal requirement.
The ATO was concentrating first on first-time non-lodgers, as Fleming said the Office didn’t want them “to fall off the wagon and never report”. The Office had found that SMSFs who don’t lodge on time also struggle to comply with administrative and regulatory obligations, although first-time non-lodgers had often experienced a life event or distraction that delayed their first lodgement.
Fleming flagged never-lodgers as the next priority, reporting that a whopping 30,000 of SMSFs appeared to have never lodged. Over 50 per cent of these appeared to have had a rollover from an Australian Prudential Regulation Authority (APRA) fund, and the average age of these funds’ members was 36.
While some had simply never operated their SMSF, some admitted illegal early release to the ATO.
Fleming said that the ATO had disqualified 257 trustees who had represented 169 funds last year, with 70 per cent of these cases being for illegal early release of funds and lending to members. One-third of reviews into this type of misconduct in FY18 resulted in action, protecting $45 million in superannuation.
Fleming said common drivers of illegal early release included financial stress or a desire to spend retirement savings on present-day benefits, but that most often it was sadly by “individuals who knew little or nothing about setting up and running an SMSF who were targeted by unscrupulous promoters”.
Regarding auditing, the ATO found that the top three audit regulatory contraventions in FY18 were related to loans (21.1 per cent of all contraventions), in-house assets (18.7 per cent), and separation of assets (12.8 per cent), which accounted for around half of all contraventions.
Fleming said that positively however, 50 per cent of these breaches were self-rectified by the time tax statements were lodged.