ATO Compliance Program 2012-2013: ATO to target SMSF trustees and auditors

Issue

ATO focus/concern

ATO action

Illegal early release of superannuation

Illegal schemes offering early access often target vulnerable groups such as people in financial distress or from culturally and linguistically different backgrounds.

• Review newly registered trustees and, if there are concerns, contact them to discuss their intention to run the SMSF.
• Identify promoters of, and participants in, illegal schemes and refer to prosecution.
• Provide service for APRA funds to verify members requesting rollover to SMSFs and investigate cases raised by APRA funds.

SMSF lodgment of annual returns

A small number of SMSFs lodge returns late or not at all – failure to lodge can be an attempt to avoid detection of non-compliance.

• Where appropriate, impose tax penalties on SMSFs who fail to lodge, in addition to charging interest on outstanding tax.

Reporting by superannuation funds

ATO administration of superannuation system relies on timely and accurate reporting of information by funds.

• Conduct 277 accuracy and completeness audits (210 desk reviews, 65 field audits and 2 fund administrator audits).
• Where appropriate, impose penalties where funds have reported incorrect information.

Tax exemption for exempt current pension income (ECPI)

SMSFs can claim a tax exemption for ECPI for any member receiving a pension from the fund. Some SMSFs get their ECPI claim wrong (e.g. by not ensuring all SMSF assets are re-valued at current market value).

• Contact 3,000 funds in respect of ECPI claims and, where appropriate, encourage voluntary amendments.

Requirement to invest on commercial, arm's-length basis

The purchase and sale price of fund assets should always reflect a true market value for the asset, and the income from fund assets should always reflect a true market rate of return.

• Audit and review 100 SMSFs to ensure compliance.

Approved auditors

Approved auditors of SMSFs play a key role in the assurance framework for the SMSF system.

• Audit and review 150 approved auditors to ensure they are properly fulfilling their role.
• Disqualify auditors who pose an ongoing risk and apply other sanctions, depending on severity of behaviour.

Payment of superannuation guarantee contributions by employers

Employers play a major role in the integrity of the superannuation system by paying superannuation guarantee contributions on behalf of their employees.

• Review around 400 high-risk employers, particularly in hospitality, real estate and carpentry.
• Check superannuation guarantee compliance of around 3,000 employers.
• Contact around 13,000 employers in response to complaints about unpaid super.

Excess contributions

Some funds, particularly SMSFs, do not act on the compulsory release authorities.

Re-reporting of contributions may be an improper attempt to reduce or eliminate excess contributions tax.

• Contact funds that fail to release money.
• Data matching to determine whether caps have been exceeded.
• Expected issue of 29,000 assessments for excess contributions tax and 30,000 refunds of first breach.
• Impose penalties were appropriate.
• Check re-reported contributions to ensure corrections are bona fide.

Payment of income tax by large SMSFs

Breach by large funds of income tax obligations usually arises from a misapplication or misunderstanding of the law rather than by a deliberate scheme to avoid tax.

• Analyse top 200 SMSFs based on total assets.
• Based on this analysis, select 25 SMSFs for a comprehensive audit.