The ATO has shared its methodology on how SMSF establishment applications are selected for greater scrutiny as part of the regulator’s risk review process.
“We consider all of the trustee and other entities that may be controlled by the trustees when the application [for SMSF establishment] is received,” ATO superannuation and employer obligations director Paul Delahunty revealed recently at The Tax Institute National Superannuation Conference.
Further, Delahunty specified the issues the regulator identifies as problematic and worthy of deeper investigation.
“The factors that do attract our attention for review would be applications where we can see that individuals have a history of insolvency, they may have been convicted of crimes related to dishonesty in particular, they may have a history of lodgement and payment obligations that have been outstanding with the ATO that have had some concern to us, and there may be situations where we hold the information about identities that have been used or may be potentially used fraudulently for the purpose of setting up an SMSF,” he noted.
“I guess the drivers behind the [risk review] work are not only to ensure that those who are entitled to register are registered, but then also for the purpose of ensuring any fraudulent applications that are received are stopped.”
According to Delahunty, the process is critical in the ATO’s efforts to prevent illegal early access of superannuation benefits – the most concerning compliance aspect affecting the SMSF sector.
“[The work means we can] play a role in ensuring funds that are purely set up for the purpose of fraud, [using] amounts rolled over from APRA (Australian Prudential Regulation Authority) funds, then making their way into illegal early access for fraudsters is not achieved,” he said.
“I guess that gives a little bit of an insight into fund establishment and what we do.”
He acknowledged around 25 per cent of SMSF establishment applications are reviewed manually by ATO staff members.
