SMSF practitioners recommending clients set up a new fund starting on 1 July may find that is no longer possible as the process can be drawn out due to extra compliance and fraud checks.
Heffron SMSF technical and education services director Leigh Mansell said examining the timeline for the establishment of an SMSF shows it is unlikely a new fund can be set up in a few business days and longer lead times are now required.
“At this point in time in every financial year we see a flurry of activity with advisers making recommendations to people to set up an SMSF and there is frustration in terms of getting an ABN (Australian business number), arranging rollovers and so on,” Mansell said during a recent webinar.
“There are also a few other hurdles in the middle now including the need to register anyone who will be considered a new company director.
“The law says they will need to have applied for a director identity before they become a director and that can take time,” she said, adding some corporate SMSF directors have shortened the process by applying over the phone to the Australian Business Register.
She said it was only at this stage that a corporate trustee can be set up, which requires the ordering of documents, and many document providers will not act unless they are provided with valid director identities.
“At this point in time, you can apply for an Australian business number and this is where the ATO is going to go through its review process,” she said.
“The ATO have said they don’t have a backlog and don’t expect any delays with fund registrations and issuing ABNs, but don’t forget the process it goes through.”
She pointed out all requests to establish a new SMSF are run through a ‘risk algorithm’ and high-risk funds are examined closely, but the total process can take up to 56 days, according to the ATO’s website.
“That timeframe can be problematic, particularly if you’ve got a client that you’re trying to set up an SMSF for the purpose of making rollovers, but once you have got the ABN, you are in a position to arrange rollovers,” she said.
“Even here though there are still hurdles and we are finding there are delays between rolling over from an APRA (Australian Prudential Regulation Authority)-regulated fund to an SMSF because the APRA-regulated funds need the member to jump through a few more hoops to do with anti-fraud measures before they’re willing to pass the money over to the SMSF.
“If you’re thinking of making a recommendation or you have already made a recommendation to clients to set up a fund with effect from 1 July 2022, if you are not making that happen now, then you need to get moving.”