The number of newly registered SMSFs that did not lodge an annual return with the ATO is on the rise, despite the regulator’s increased focus on and increased engagement with the trustees of these funds.
The latest ATO statistics show, of all the SMSFs registered in 2018 with a first return due to be lodged on 28 February, 5500 failed to meet this obligation. This non-compliance translated to $415 million of retirement savings benefits being at risk, according to the SMSF regulator’s data.
“That’s alarmingly 22 per cent of the new registrants of the year. Last year it was 13 per cent and when we started monitoring this, when we first started implementing the front door, it was only 7 per cent,” ATO SMSF segment assistant commissioner Dana Fleming revealed to delegates at the Self-managed Independent Superannuation Funds Association 2019 SMSF Forum in Melbourne last week.
“So you can see my concern here in the space of the escalation in the non-lodgement of the first returns.”
Fleming said the ATO had written to all of the SMSFs and trustees who have did lodge their inaugural annual return and pointed out a change had been made to the correspondence this year.
“We changed our letters and wrote to them in bigger [font] as to when their return was due. We wrote to them three weeks before their return was due to remind them it was due, and we also wrote to them two weeks after they were late to remind them it was due,” she said.
“So I’m really concerned that we’ve done more than we’ve ever done before and we’ve seen a 9 per cent increase in never-lodgers even after we took that action.”
Where an SMSF trustee has rolled benefits over from another super fund, the ATO is contacting them for a third time in a bid to have them lodge their annual return in arrears.
“Now we have written to them and said: ‘Your retirement savings are at risk because you haven’t lodged. We can see you’ve rolled [benefits] over and if you don’t respond we’re going to assess you for illegal early release immediately.’ Hopefully that triggers some engagement,” Fleming said.
“For those SMSF that didn’t roll over [any benefits], we’ve just written to them and said: ‘We can see you’re not operating your SMSF. Did you decide not to proceed and can you just let us know so we can cancel your registration?”
Earlier this year, the ATO revealed it had protected $45 million of superannuation as a result of its compliance activity regarding illegal early release of benefits.