An update posted on the ATO website on Wednesday stated that from 1 October, funds whose annual returns were overdue by over two weeks would have their status on the Super Fund Lookup (SFLU) system changed to “regulation details removed”.
“Lodging your SMSF annual return on time is a fundamental part of your obligations as an SMSF trustee,” the ATO said.
“We’re taking this approach because non-lodgement combined with disengagement indicates that retirement savings may be at risk.”
The ATO said funds could have their status on SFLU reinstated when all overdue lodgements were brought up to date.
The office would perform checks on the first business day of each month and suspend or reinstate funds on the SFLU system depending on the lodgements that had been received in the previous month.
If SMSF trustees did not think they would be able to lodge their annual returns in time, the ATO said, they should call and seek a deferral to lodge.
During the time where the SMSF had their SFLU status suspended, members would need to inform their employer to make contributions into an alternative fund as the SMSF would not be able to accept employer contributions until its status was reinstated.
Once reinstated, the member would need to roll over any benefits received in the interim back into the SMSF, the ATO said.
The update follows comments from ATO SMSF future client experience director Edward Chung at the recent Class Connect conference, indicating non-lodgement was a key area of focus for the office in uncovering non-compliant funds and illegal early super release schemes.
“Our observation is from those SMSFs that don’t lodge, they have more regulatory risks,” Mr Chung said.
“When we describe our non-lodgement population, we have two groups: lapsed lodgers and never lodgers. Lapsed lodgers are those who were lodging on time but now have one or more overdue lodgements, and never lodgers are new SMSFs who have never lodged.
“When there is an APRA fund balance reduction of a member and they belong to a never lodger, there is a high indication that there has been an illegal early release.”
The ATO canot meet its own standard turnaround time of 28 days for issues, but it expects SMSFs to meet deadlines within 14 days. Get real.
Iit is not hard to lodge an SMSF tax return on time if you try, and if the accountant is the problem leave and go somewhere else. Really no excuse other than ill health or very very rare circumstances beyond control. I think this is good for the industry as it will ensure Trustees must engage and we don’t have to chase delinquents anymore.
The current ATO policy seems to be based on the (I hope) incorrect assumption that the only reason SMSF’s exist is to cheat the tax system or to unlawfully access superannuation money. Last month it was an overly aggressive and threatening letter about the “diversification REQUIREMENT” – which is not actually a requirement, now its this. As previous poster – yes I can understand if 6 months late, even if 2 months late – but 2 weeks – really? And will they be imposing penalties on employers that make a SGC contribution during a period of “regulation removed” listing?
All sounds like a SGC nightmare for unrelated employers.
Two weeks is just unrealistic, especially when their own systems seem to be having issues so frequently, and they have apparently got extended delays in correcting regulation status anyway.
What’s next – employees won’t be able to be paid if they haven’t lodged their personal tax return?
7 months is not a lot of time? OK.
Is the Tax Department for real? cause they are starting to very closely resemble the “ivory tower” idiots who change legislation with the stroke of a pen with no thoughts as to the unintended consequences. How about a bit of “client relationship” building with the Accountants instead of coming out with crap announcements like this.
The article states that ‘members would need to inform their employer to make contributions into an alternative fund’. If they are not lodging and are disengaged, I think its highly unlikely that they are going to tell their employer to pay their contributions into a separate fund. It would be useful if the ATO could clarify how the employer is supposed to comply with their SG obligations where the fund is unable to accept the contribution and the employee hasn’t told them to pay the contribution elsewhere.
I think the comment above from Jane regarding deadlines suggests poor client management more than anything. With software like BGL, Class and Supermate, gone are the days that you have to wait for the client to walk in the door with their bank statements prior to commencing the work. Sure, we still have to wait for annual tax statements, but if the fund is already 95% done and that’s all you are waiting for its not as bad.
Is the ATO serious? If a return is six months late I could probably understand, but two weeks? Who exactly are they consulting with before they release such thought bubbles? It’s certainly not the industry.
It just shows how little effort the ATO goes to, to understand accounting.
With many listed trust investments or platforms not issuing tax statements until mid October each year, accountants have a narrow window of only about 7 months (including Xmas & New Year) to get the work done, out to be signed, out to be audited and lodged by 15 May each year.
It is not a lot of time, but with hands on accounting experience unlikely in the ATO, they will never understand.
You could start by extending the lodgement date to 30 June for all. Then being more liberal with lodgement extensions, not threatening and nasty as demonstrated by this announcement.
The ATO need to work with taxpayers and industry. At the present all you are doing is alienating yourselves, generating resentment and distrust in the community.