The current ‘key risk areas’ in the administration of self-managed superannuation include illegal early release, non-lodgement of annual reports, aggressive tax planning arrangements and high-risk auditors.
The ATO reviewed 10 per cent of the 21,200 applications for registration of an SMSF in the first half of the financial year, looking for evidence of illegal early release.
As a result of the review, 123 funds had their details withheld from Super Fund Look Up, meaning they were unable to receive payments or rollovers. In addition, 329 newly registered SMSFs had their registration cancelled.
Dana Fleming, ATO assistant commissioner superannuation, says: “Illegal early release most commonly occurs where individuals want the money due to financial stress, a desire to spend on a present day benefit, or are targeted by unscrupulous promoters.”
About 14 per cent of SMSFs lodge their annual returns late. The ATO’s view is that non-lodgement is a strong indicator that savings may be at risk. SMSFs that have trouble with their first lodgement often continue to struggle to meet their compliance oblifations
Last year it undertook its first non-lodgement program. So far this year it has identified 64,000 lapsed lodger SMSFs, which are overdue by an average of 3.4 years
Fleming says the ATO is writing to auditors, tax agents and trustees to get them back on track. It plans to follow up with audits for that that have not responded. Outcomes from an audit include penalties, default assessments with penalties, disqualification of trustees and notices of non-compliance.
Another concern is the significant number of trustees misusing auditor numbers. Every SMSF tax return must include the fund’s approved auditor number as evidence that an audit has been done before lodgement.
“We’re concerned that some trustees are quoting incorrect SMSF audit r numbers, either in genuine error or in an attempt to conceal that an audit hasn’t been completed.” Fleming says.
The ATO has 100 SMSFs, representing 22 agents, under investigation for this matter, with another 231 cases scheduled for review. Last year, the ATO referred five tax agents to the Tax Practitioners Board for deliberate auditor number misuse.