SMSF trustees who have outstanding compliance issues with the ATO should aim to rectify them as soon as possible as it is unlikely they will be able to rely on the COVID-19 grace period for much longer, an SMSF legal expert has advised.
Townsends Business and Corporate Lawyers associate Jeff Song said SMSF trustees should heed advice from the corporate regulator to fix any issues they may be aware of and do so as soon as possible.
“It is better to seek advice, fix those problems and then inform the ATO of the issue and what has been done to repair it, and we have found few problems in taking that approach,” Song said.
He said the impact of COVID-19 on the SMSF sector resulted in his firm seeing fewer requests for help from SMSF trustees due to the no-action position taken by the ATO throughout 2020, but warned there could be more ATO compliance action in 2021 because of the virus.
“Trustees should keep in mind the ATO no-action relief was for a limited time and restricted to a number of COVID-19-related issues and any other issues will still carry forward into when the relief has ended,” he noted.
He said the main areas where compliance problems arise are limited recourse borrowing arrangements, loans within a fund and a change of trustee.
Trustees should also be aware of issues in relation to electronic signatures and residency, he noted.
“The temporary determination around digital signatures has ended so trustees need to check if they must go back to wet-ink signatures or whether state legislation still covers them for the future,” he said.
“Residency issues will also be an issue where a fund has members who may be overseas and unable to return home for some time, particularly if they make up a majority of the members. SMSFs in this case need to be looking towards an enduring power of attorney to head off any potential problems.”
