There are tens of thousands of SMSFs currently hanging in the balance

It is no surprise that with the raft of changes recently introduced that the Australian Taxation Office (ATO) are once again focussing their attention on Self-Managed Superannuation Funds (SMSFs).

Recently the ATO’s outgoing director of superannuation indicated that around 40,000 funds had not met their lodgement obligations and were at risk of being made non-complying by the ATO. While the ATO will usually work with funds to ensure they remain compliant, continual non-rectification of issues leave the ATO little option other than to take further action. If a fund is marked as non-compliant, the tax status of the fund changes and it is no longer eligible for the concessional rate of 15% tax. Instead, a non-compliant fund will be taxed approximately 50% of the asset value of the fund, which is then paid to the ATO.

While the ATO may be reluctant to make a SMSF non-compliant, they do not have the same hesitation when imposing penalties on the trustees. Late lodgement of documents with the ATO, which is a common issue, could lead to a fine on the trustees of over $2,000. These fines and penalties cannot be funded from the superannuation fund and must be paid personally and in extreme cases civil or criminal prosecutions can tax place. The ATO penalty system works on a point system with more serious breaches attracting higher points and consequently a higher penalty. For example, breaching the in house asset provisions attracts a penalty of 60 points which equates to a penalty of $12,600 per trustee. It is often the case that if a superfund has one issue they frequently may have more and these penalties can accumulate. For more information on the ATO’s approach to compliance issues please refer to;

The ATO has also released a practice statement on real time reporting for SMSFs and while it is not as onerous as original suspected, it will require additional reporting by SMSFs in some instances. In a recent presentation by the ATO’s director of Superannuation, it was made clear that pension payments and gains and losses are not events that will require reporting when the legislation is eventually passed. For more information, please see the link below:

Increasingly it will become difficult for SMSF trustees to be able to operate without the support and assistance of their professional advisors. With the ATO’s increased scrutiny, risk of penalties and increased reporting obligations, the question for many is whether SMSFs are appropriate for them to establish or continue.


Source: Written by Roger Potter, Director of Wybenga & Partners Pty Limited, Chartered Accountants, Sydney