The Australian Taxation Office (ATO) will crack down on SMSFs that fail to lodge annual returns in a timely manner by preventing them from receiving employer contributions and rollover benefits from large superannuation funds.
ATO self-managed superannuation funds assistant commissioner Matthew Bambrick said extended delays in lodging returns put funds at a high risk of non-compliant behaviour, and this year the ATO would act against such funds.
“Failure to lodge a return suggests the fund is not being audited. This in turn makes one wonder what the fund has to hide that it does not want reported,” Bambrick told delegates at the Small Independent Superannuation Funds Association conference in Melbourne recently.
“Also, if a fund can’t get through the task of doing its annual return, one wonders what else it is failing to do in accordance with the law.”
To encourage funds to lodge overdue returns, the ATO will remove the regulation details of all SMSFs with two or more years of overdue lodgements from Super Fund Lookup until they are up to date with returns.
That in turn could prevent the fund from receiving contributions from employers and rollover benefits from Australian Prudential Regulation Authority funds, which used the Super Fund Lookup facility before releasing payments, Bambrick said.
About 18,000 funds that consistently failed to lodge or were thought to be inactive would be encouraged to wind up.
This year, the ATO would also focus on engaging with new trustees to ensure they were compliant, could operate their SMSF and were not seeking illegal early access to retirement benefits.
It will monitor for tax avoidance schemes, review irregularities in exempt current pension income and non-arm’s-length transactions, and look more closely at funds reported to the ATO by approved SMSF auditors.
“We want to make those trustees more fully aware of their obligations and ensure the contraventions are dealt with appropriately,” Bambrick said.
The ATO will work with SMSFs that had made less serious breaches to rectify and unwind the offending transactions. In more serious cases it could impose penalties, make funds non-complying with the loss of concessional tax treatment, and disqualify or prosecute trustees.
In 2012/13, the ATO made 150 funds non-complying, disqualified 440 people from being a trustee, wound up 70 funds and entered into 513 enforceable undertakings.
However, Bambrick said only about 2 per cent of funds had been reported by approved auditors as contravening the rules. “We think the sector is in pretty good shape,” he said.