In the month of February Mark and myself attended the SMSF Association’s annual conference. As we provide strategic advice to clients in the SMSF area, the conference further upskills our knowledge to be able to pass on up to date information to them.
The conference had many interesting sessions run throughout the 3 days, but one session that I’ll cover in this article is a session ran by the ATO. The ATO session covered their thoughts on the SMSF industry and some of the audit risk areas.
Some points that came from the session were:
– The number of SMSFs have grown in 20 years from 200,000 to 600,000, with assets owned totalling about $750 billion
– The ATO regulate SMSFs with about 12,000 being established in the last financial year. To check if your fund is correctly regulated with the ATO, please go to https://superfundlookup.gov.au/
– Per the ATO, there is a high correlation with new SMSFs being established and illegal early access to members balances. Of the 12,000 established
last financial year, 10% of these had an early release and 33% had the SMSF registration cancelled. Reasons for early release included financial
hardship, present day requirement and bad advice
– The ATO confirmed that non lodgement of annual tax returns for an SMSF is a risk flag. They did confirm that 86% of SMSFs are lodged on time
– They currently have a non lodgement program to bring SMSFs up to date. There are about 64,000 lapsed lodged with on average 3 to 4 years of tax
returns outstanding. This covers about $27 billion of assets.
Reasons for non lodgement included; members were on a pension and didn’t realise they needed to lodge, members didn’t know they had an SMSF
and it became to difficult to administer the Fund. The ATO are actively contacting members, tax agents and auditors to get these tax returns up to
date. Results of non lodgement could result in cancellation of the Fund
– A risk area the ATO are monitoring are regulatory contraventions. These are contraventions reported to the ATO by auditors. About 8,000 SMSFs
had a contravention in the 2018 year. These included incorrect related party loans, in house assets and incorrect separation of assets. 50% of the
contraventions had already been rectified by the SMSFs
– The ATO are monitoring the top 100 SMSFs and auditors to make sure they are doing the right thing
– The ATO have concerns over SMSFs and Limited Recourse Borrowing Arrangements (LRBA). They feel that the majority of funds that go into these
types of arrangements have received bad advice. 95% of these arrangements cover real property and for 90% of them it is the only asset in the
fund. The ATO is concerned about diversification
– The ATO commented that about 1/3 of SMSF’s didn’t know they needed an investment strategy. Having a strategy is a Trustee requirement
With the use of technology the ATO is getting smarter in monitoring SMSFs. Rubiix uses the best practices to assist our SMSF clients to get the most out of their SMSF based on relevant advice specific to them and their circumstances. If you are interested in learning more, please contact our office.
Submitted by: Stuart Coulthard- Director