What is on the ATO Focus for SMSF in 2023

KEY ISSUE

ATO FOCUS

1. Non-lodgment of SMSF annual returns.

Even if their fund is in the retirement phase, trustees must file an annual SMSF return.

The ATO may see from the SMSF annual return whether the fund is meeting its legal and tax requirements as well as the members’ superannuation balances. Non-lodgment could potentially point to more serious compliance problems. As an illustration, the ATO has noted situations in which formerly complying SMSFs stop filing because they have an unrepaired breach and want to avoid being discovered. Furthermore, SuperFund LookUp may remove an SMSF’s details if its annual return is more than two weeks overdue. This limits the employer contributions and rollovers the fund may accept. The ATO is also concentrating on tax advisors and auditors who have unpaid invoices for their own SMSFs.

2. Regulatory contraventions.

In comparison to the 2021 income year, the number of SMSFs with an ACR (Auditor/Actuary Contravention Report) filed increased by almost 3.5%. Moreover, there was a 6.3% increase in reported breaches.

The ATO is especially concerned with violations involving unlawful early access (refer below). Another frequent worry is when group structures are utilised to transfer income or assets to an SMSF in an effort to get around the contribution limits and other tax and regulatory regulations. This could happen if related-party assets are undervalued and revenue from property developments, unit trust distributions, private business dividends, and PSI is improperly directed into an SMSF. When a problem is found with a client who is an SMSF, a rectification plan needs to be created. It is advisable to promote voluntary disclosure of any significant regulatory violations that cannot be corrected.

3. Approved SMSF auditors – adequacy and independence.

SMSF auditors play a crucial role in confirming the authenticity, correctness, and compliance with super rules of an SMSF’s financial accounts.

The ATO is continuing to focus on behaviours including audit adequacy, internal audits, and reciprocal auditing arrangements in its efforts to identify higher risk corporations. Other common issues include not gathering enough relevant audit evidence, evaluating the audit evidence insufficiently, and using the wrong paperwork to back up the results.

4. Misusing the SMSF auditor number.

This happens when a fund’s auditor is misrepresented as an accredited SMSF auditor who either didn’t perform the audit or didn’t perform one at all.

Before submitting the 2023 SMSF annual return, make sure the auditor’s details (as indicated under Item 6 – SMSF auditor of the annual return) agree with the audit report to assist reduce the risks associated with this issue. Included in this are information such the SMSF auditor number, the auditor’s name, and the date the audit was finished.

5. Unauthorised early access.

Members are not permitted to access their superannuation funds until they have satisfied a condition of release (e.g., turning age 65).

The ATO is focusing on SMSF trustees who used the bank account of their fund to pay for things like company debts, vacations, renovations, and new cars. Early access is typically reported as a loan or a violation of the payment rules in an ACR to the ATO.