The number of auditor contravention reports (ACRs) lodged with the ATO has increased in both the 2021 and 2022 financial years with personal use of SMSF assets being the main sources of non-compliance.
“In the 2021 financial year we received auditor contravention reports, or ACRs as we like to call them, for over 13,800 funds. Within those ACRs almost 40,000 contraventions were recorded. This was an increase of nearly 10 per cent over the last year,” ATO SMSF regulatory branch assistant commissioner Justin Micale said during his presentation at The Tax Institute Superannuation Intensive event.
“So far for 2022 we’ve received ACRs for over 7200 funds and 22,000 contraventions being reported. This is an increase of nearly 22 per cent from the number of SMSFs with ACRs compared to the same period in 2021.
“The two most common contraventions relate to reported loans to members and trustees not separating their personal and business affairs from their SMSF.”
Micale stressed how important it is for trustees to understand these activities are contraventions and can lead to additional tax penalties and in the most serious cases the disqualification of trustees.
According to Micale, the severity of the penalty for the contravention will depend upon factors such as the impact of the breach on the fund, the compliance history of the trustee and their attitude to meeting future regulatory obligations.
“In 2021 we disqualified 205 trustees and other contraventions attracted administrative penalties. This can have wide-ranging impacts as the disqualifications are published and the penalties can be significant, particularly when trustees treat their SMSF bank account as if it’s their personal ATM,” he noted.
The ATO identified the key drivers for these contraventions are financial stress, poor record-keeping and a lack of understanding of the superannuation rules.