A Treasury proposal to add a new deadline for the finalisation of SMSF financial accounts is a blunt instrument that goes above current standards and provides only a monetary benefit for the ATO, according to industry bodies opposing the move.
The Tax Institute noted its opposition to the proposal contained in the Exposure Draft of the Treasury Laws Amendment (Miscellaneous and Technical Amendments) Regulations 2020, stating no current time frame existed by which SMSF accounts had to be prepared and adding one was mainly a financial consideration.
“Section 35B of the SIS (Superannuation Industry (Supervision)) Act [which relates to accounts] does not currently prescribe a time by which accounts must be prepared, so the penalty under item 2 of the table in section 166 of the SIS Act [which relates to administrative penalties] is currently not able to be imposed by the ATO on SMSF trustees,” the institute said.
“The proposed change seems to be motivated by the inability of the ATO to impose an administrative penalty under item 2 of the table in section 166 of the SIS Act,” it said, noting the proposed penalty for not preparing financial accounts and statements within the 45-day period was $2220 per individual SMSF trustee.
It also stated it was hard to identify the mischief where an annual return is lodged on time and the accounts were prepared any time before the lodgement date.
“If the annual return is otherwise lodged on time, it seems unreasonable to impose a penalty on an SMSF trustee for non-compliance of $2220 because the accounts were prepared less than 45 days before the lodgement date.” it said.
“We cannot point to any other provision in the tax or superannuation laws which imposes a penalty for failing to do something before a lodgement date. Provided the taxpayer’s lodgement obligations are met — and there are sufficient penalties for those that do not comply — it should not matter whether the accounts were prepared two months or 10 days before the lodgement day.
“The proposed amendment fails to target the integrity of the system or improve the revenue collection from SMSFs. It also fails to provide any benefit to the ATO (other than monetary), and there is no trade-off for SMSFs. This measure imposes another compliance burden on SMSF trustees without offering any tangible benefit.”
In voicing its opposition to the proposal, the Institute of Public Accountants (IPA) stated it “is an inherently blunt instrument that is likely to be ineffective, difficult to administer and is likely to unfairly punish the wrong people”.
IPA advocacy and policy general manager Vicki Stylianou said the $2200 penalty was disproportionate for late lodgement, which may be an indicator of other compliance issues involving the SMSF, and the 45-day time frame would not address those issues.
“We believe that instead of encouraging early lodgement, it will place additional pressure on taxpayers and accountants, which may lead to the lodgement of inaccurate or incomplete submissions. This in turn will lead to more remission appeals, increasing the workload of the ATO,” Stylianou said.
“A key impediment to the 45-day deadline is the practical reality of non-compliance for those funds having an earlier lodgement date of 31 October not being able to prepare their accounts by mid-September as many of the managed funds that they rely on do not publish their information until late September or early October.
“If such funds have investments in managed funds which do not report until the end of September, then the time frame is totally unrealistic.
“We are unaware of any provisions in superannuation legislation that impose punitive measures for failure to comply with a requirement prior to the associated lodgement date. This proposed amendment would be creating new impositions above and beyond those linked with failure to comply with lodgement dates.”