ATO provides clarity on nil member balances

ATO director of superannuation and employer benefits Paul Delahunty said the ATO does not consider a nil member balance in itself to be a specific compliance issue.

However, Mr Delahunty noted that a nil member balance could indicate some issues around the administration of the fund.

“One of the things [we consider] in relation to nil member balance is what has actually transpired in relation to history. We would say, well, has there been some potential mischief that’s occurred?” said Mr Delahunty, speaking at the same conference.

“Have there been any rollovers that have occurred from another fund into the SMSF and which has been used to facilitate illegal early release?”

Mr Delahunty said it’s also important that SMSF auditors consider some of the potential administration issues around whether they are a member or just a trustee.

“They may have been mistakenly added as a member, and so there may be administrative issues associated with how it’s been set up,” he explained.

He also outlined that it is the auditor’s responsibility to consider section 17A and determine whether the fund meets the definition of an SMSF.

Ms Aisbett said that in the majority of cases she sees with nil member balances, there is no mischief and that it will often be for succession reasons.

“With most funds of mine with a member with a nil balance, it’s because mum and dad getting a bit elderly, they just bring in one of the kids so that the kids are already in play if something happens and mum or dad pass away or they become impaired,” she said.

Ms Aisbett said it is important that where there’s someone who signs up as a member and has a nil balance that the auditor asks about contributions and rollovers and whether there’s a fund somewhere else.