ATO annual report outlines SMSF enforcement action
The ATO has released its 2013/2014 annual report, outlining where it has undertaken enforcement action in the past 12 months and its areas of compliance focus for the SMSF sector next year.
The annual report, tabled in Parliament on Wednesday, indicates 37,000 SMSF compliance activities were undertaken in the 2013/2014 financial year.
Many of these activities resulted in enforceable undertakings to rectify breaches, and where serious breaches occurred, compliance actions included making 129 funds non-complying and disqualifying 585 trustees.
In 2013/2014, the ATO also issued approximately 66,000 assessments, raising over $256.4 million in liabilities where SMSF members exceeded the contributions caps. However, the ATO noted this represents only 0.6 per cent of those who made contributions to their superannuation fund.
The ATO also noted the introduction of a ‘lapsed lodger’ strategy to identify SMSFs with two or more overdue lodgements. The regulator withheld 22,000 lapsed lodgers from the Super Fund Lookup service, making them unable to accept rollovers or new contributions until their lodgements were brought up to date.
This resulted in approximately 24.1 per cent of SMSFs addressing their outstanding lodgements and 3.7 per cent commencing wind-up.
The ATO will begin targeted compliance activities for those SMSFs with annual returns still outstanding, the annual report stated.
The report identified a reasonable decline in large-scale illegal early release of superannuation since the introduction of an automated risk assessment of trustees and a member verification process.
“In 2013/2014, we prevented 258 funds from entering the system and removed 186 existing funds where we suspected illegal access was planned. This approach has proven very effective at reducing the incidence of illegal early release and we remain vigilant for new schemes and methods,” the ATO stated.
Moving forward, the regulator plans to continue its focus on limited recourse borrowing arrangements in light of the strategy’s increasing popularity among SMSFs.
“With limited recourse borrowing arrangements increasing in value from $2.5 billion at 30 June 2012 to $8.3 billion at 30 June 2013 and [to] an estimated $8.7 billion at 30 June 2014, we will continue to ensure these arrangements are appropriate and meet all legislative requirements,” the ATO stated.
The ATO is also confident it has overcome a vast majority of “system issues” encountered in 2012/2013, allowing for the backlog of assessments and amendments to be cleared.
“This placed us in a sound position for the commencement of legislative changes in 2014/2015, which will see excess concessional contributions taxed as part of an individual’s income tax assessment,” the regulator stated.
The report also stated that the ATO intends to engage with individuals to prevent lost superannuation accounts, and expand its online tools to assist trustees and approved SMSF auditors.