Self managed super fund (SMSF) audit and compliance strategies can help SMSF trustee(s) to meet their legal responsibilities, to reduce administrative burdens and to avoid unnecessary breaches of the superannuation law.
SMSF trustee(s) must know and understand their obligations to ensure their SMSFs are compliant. The summary continues.Kate Hocking
The ATO Compliance Program 2009-10 details the tax and superannuation compliance risks the ATO is most concerned about for SMSFs — and explains what the ATO is doing to address those risks. You can access the program here.
The compliance program for 2009-10 concentrates on regulatory issues including:
The most common reporting errors made by SMSFs relate to:
In certain states, the legislation may prevent trustee(s) from holding assets using the SMSF's name in the title. In this case, the ATO states that a caveat, instrument or declaration of trust must be executed for the asset. For example, this may include the trustee for the SMSF as the asset owner (i.e. John Smith as trustee for John Smith Super Fund).
The ATO's stated approach in response to a breach is to further educate trustee(s) and tax agents so that they are aware of their responsibilities and obligations. The action the ATO then takes when an SMSF breaches the law depends on the individual circumstances.
When considering action taken by SMSF trustees, the ATO looks at:
When non-compliance is established, the ATO will issue a non-compliance notice to the SMSF trustee(s).
The ATO's approach is to work with SMSF trustee(s) to help them rectify breaches largely caused by circumstances outside their control. However, if the trustee(s) make no effort to rectify the breach, then the SMSF may be classified as non-complying. As a consequence, its concessional tax treatment will be cancelled retrospectively.
Failure to comply with the Superannuation Industry (Supervision) Act 1993 and the Superannuation Industry (Supervision) Regulations 1994, can result in the ATO imposing a range of penalties.
The ATO may:
For less serious matters, the ATO may agree to allow trustee(s) to rectify the problem (without the ATO necessarily imposing regulatory sanctions).
Administrative income tax penalties may apply if the trustee(s) make a statement (or fail to lodge a statement) that results in the underpayment of tax. The penalty imposed depends on the conduct of the trustee(s).
A general interest charge is also applied to tax payments not received by the due date. The general interest daily charge rate is worked out by adding seven percentage points to the 90 day bond accepted bill rate for that day, and dividing that total number by the number of days in the calendar year.
Trustee(s) can appeal an ATO decision by applying to the Administrative Appeals Tribunal to reverse the decision.
The main types of ATO SMSF advice available are:
1. SMSF public rulings, SMSF determinations and SMSF product rulings; and
2. SMSF specific advice.
Read about the differences between private and public rulings here under paragraph 1 of the Pre-Audit Strategy.
The requirement for SMSF product rulings and SMSF specific advice is that the ATO must be provided with all relevant facts in relation to the matters on which the SMSF advice is sought.
The ATO provides SMSF specific advice in writing to a specific transaction or arrangement that SMSF trustee(s) have entered into, or might, enter into. The ATO advice is based on the facts of the specific transaction or arrangement defined in the application for SMSF specific advice. While similar in form to a tax private ruling, SMSF specific advice is not binding on the ATO and does not have the same review rights as a private ruling.
For more information, contact Maddocks on (03) 9288 0555 and ask for a member of the Maddocks Superannuation or Tax and Revenue Team.
You can read earlier ClearLaw articles on a wide range of SMSF topics here.
Download a checklist of the information you need to order a document package.
 ATO's SuperUpdate Newsletter, April 2005.
 The following information is based on a speech by Stuart Forsyth, Assistant Commissioner of SMSF segment, SISFA on 14 September 2009, 'Self-managed superannuation funds — common mistakes and other compliance issues.
 Section 133 SIS Act.
 Section 120A SIS Act.
 Under section 264 of the SIS Act.
 Stuart Forsyth, Assistant Commissioner of SMSF segment, SISFA on 14 September 2009, 'Self-managed superannuation funds — common mistakes and other compliance issues..
Leigh is a partner in the Maddocks Tax & Revenue team.
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His advice covers both direct and indirect tax considerations.
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For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of their team.