The increased scrutiny of SMSFs by the ATO has been positive for the sector and will add to its long-term success, according to SMSF technical specialist Heffron, which also praised the regulator for its work to date.
Heffron managing director Meg Heffron said the ongoing success of the sector relied on having SMSFs and advisers being seen to comply with the rules.
“That necessarily means punishing and eliminating those who wish to do damage. The industry as a whole therefore welcomes active regulation,” Heffron said.
“It is gratifying to see the ATO flex their muscles with recalcitrant funds. The tax regulator has definitely become more assertive and active. They’ve been ramping up penalties on SMSF trustees who break the rules and taking a much tougher stance on late lodgement of returns.”
She praised the ATO for its regulatory stance over the past 20 years, which saw a period of rapid growth in the size of the SMSF sector, and said it was important the regulator retained its focus on high-priority targets while also supporting trustees that complied with the rules.
Looking back over the year, she noted the sector had also been under examination during the federal election campaign as part of the debate around the retention of franking credits and negative gearing, which played a part in the election outcome.
She pointed out the ALP positions on these issues were regarded as an attack on the retirement incomes of many older Australians and proved unpopular at the ballot box.
“Whatever you think of negative gearing or the refunding of excess franking credits, the electorate certainly decided that changing the rules suddenly and without notice was fundamentally unfair on the retirement incomes of older Australians,” she said.
While these issues ranked highly during 2019, Heffron director and policy expert Martin Heffron pointed to the government’s Retirement Income Review as being likely to dominate the agenda in 2020.
“The Retirement Income Review’s mandate to gather facts rather than make recommendations give it enormous potential. If it were charged with making recommendations, political pressure might cause it to hold back on contentious issues. Instead, if compelling enough, facts about taboo areas might prompt major policy action,” he said.
“This may include the factual impact of politically controversial policies such as the generous treatment of the Australian family home for tax and benefit purposes. The review could also factually describe the size of tax concessions that get wasted when retirees take lump sums.”
