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ATO priorities on regulating SMSFs

Recent speeches by the ATO's Commissioner and Deputy Commissioner have given an insight into the ATO's regulatory priorities for SMSFs in the new 'Simpler Super' world. Julian Smith

Increased funding for ATO regulation

The Plan for Simpler Super specifically includes more and better regulation of SMSFs - including:

  • the ATO's budget will increase by $112m to better regulate SMSFs;
  • the supervisory levy SMSFs have to pay will increase from $45 to $150; and

Simpler annual return for SMSFs

A new annual return document will replace the existing: regulatory return, income tax return and member contribution statement. This will simplify SMSF administration and may improve the consistency of information SMSFs provide.

Trustees to sign declaration

All new SMSF trustees will have to sign a declaration stating they are aware of their obligations as trustees and of their regulatory obligations.

The ATO's increasing focus

Even though the ATO has gradually increased the intensity of its supervision of SMSFs in recent years, the ATO now plans to 'triple [its] casework for self managed superannuation funds' over the next two years.

This reflects the ongoing change in the ATO's approach from an educational approach to a more active 'compliance verification program' involving site visits aiming to establish positive compliance early in a fund's life. Presumably this is some extension of the current system in which the ATO notifies funds if there is an obvious compliance issue - such as a single individual trustee of a fund.

The ATO also plans to revise and re-issue its educational tools in light of Simpler Super.

The ATO and SMSF auditors

It seems the ATO sees its supervision of SMSF auditors as a key way to improve SMSF compliance. This supervision will involve the ATO reviewing an auditor's processes looking for compliance issues that may lead to direct SMSF audit.

Leniency unlikely

Perhaps as a consequence of the ATO's move towards more active compliance it has not disclosed an intention to allow SMSFs any leeway in coming to terms with Simpler Super. For example, the Deputy Commissioner made this clear in her speech of 7 March 2007 when she said 'I've been asked whether we will allow period [sic] of grace to allow trustees of self managed funds to get used to the new self managed fund rules. The short answer is no.'

This approach seems reasonable given that the law on the main compliance problem areas is not changing fundamentally, see below.

Typical problem areas

Reported problem areas with SMSF compliance continue to cover similar ground. The auditor contravention reports lodged since the system was introduced in July 2004, breakdown as follows:

  • loans to members/relatives - 18%
  • assets not in the name of the fund - 16%
  • breach of in house asset rules - 14%
  • documents requested by auditor not provided - 11%
  • borrowings by SMSF other than for allowable reasons - 9%
  • * breach of sole purpose test 8%

More information

For more information on the ATO's approach:

For more information in relation to Simpler Super generally, please contact Maddocks on 03 9288 0555 or 02 8223 4100 and ask for a member of the Maddocks Superannuation Team.


Lawyer in Profile

Julian Smith
Julian Smith
+61 3 9258 3864

Qualifications: BA, LLB, Monash University, LLM, University of Melbourne

Julian is a Partner in Maddocks Commercial team. He advises a diverse range of clients across the Australian commercial and financial services landscape.

Julian's corporate practice spans various sectors, including financial services, professional services, and family-owned enterprises. He advises on:

  • capital raising,
  • disclosures,
  • restructures,
  • mergers and acquisitions,
  • corporate governance,
  • directors' duties, and
  • trusts, corporations, and securities law.

Julianís financial services practice involves advising financial market participants on the entire financial services lifecycle including fund structuring, management options, and compliance with regulatory requirements.

Julian also offers guidance on alternative and disruptive financial services businesses, such as online foreign exchanges, internal markets, and management rights schemes.

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