The ATO has yet to decide if it will extend its letter writing campaign to SMSFs with high allocations to a single asset, saying the current campaign has raised sufficient awareness about the obligation of trustees to have a diversified investment strategy.
In response to questions from selfmanagedsuper, an ATO spokesperson said any further action would not be considered until next year after a review of the campaign.
“We do not see the need to consider a wider targeted review at this stage. However, we will consider if further action is necessary once we have analysed the results of this campaign early in the next financial year,” the spokesperson said.
“It has been encouraging to see that as a result of this campaign there has been increased awareness of this obligation under the law.
“While there has been a range of perspectives, we believe the focus has helped raise awareness about the importance of having a complying investment strategy.”
The SMSF regulator noted it would be unable to provide definitive results about the campaign until mid-2020 as most of the SMSF trustees who received a letter would not have their fund audited until next year and can lodge their 2018/19 SMSF annual return in May 2020, if they do so via a tax agent.
“This means we will not know until sometime early in the next financial year once all these returns are lodged whether we will see an increase in the lodgement of any auditor contravention reports for the 2018/19 audit based on a regulation 4.09 contravention [of the Superannuation Industry (Supervision) Regulations],” the spokesperson said.
“Our letter was purposefully issued early this financial year so that trustees would have time to make any necessary amendments to their investment strategies to ensure it complied with regulation 4.09 prior to the 2018/19 audit so they could avoid any potential application of penalties.”
The spokesperson also noted that while auditors will be required to lodge auditor contravention reports where they find an SMSF without an adequate investment strategy, the trustees would not automatically receive the $4200 penalty indicated in the letters sent to 17,700 funds in late August.
“In the normal course of receiving an SMSF auditor contravention report, we will contact these trustees asking them to rectify the contravention. If they do not comply with our request, a penalty of $4200 may be imposed on the trustees,” they noted.
This conciliatory approach was outlined in February by ATO SMSF segment assistant commissioner Dana Fleming during a presentation at the SMSF Association National Conference.
“Where contraventions have occurred but individuals are willing and able to continue to meet the obligations of running their SMSF, we will direct our actions to rectify compliance and assist them to get back on track,” Fleming said at the time.
The ATO’s position also seems to run counter to predictions from the SMSF sector that a wider review of SMSF investment strategies was likely to take place.
