Unforeseen consequences in ATO late lodgement policy
The ATO’s recently announced policy to incentivise timely lodgement of SMSF annual returns by removing fund details from Super Fund Lookup (SFLU) if they fail to lodge on time could have additional consequences for trustees, according to SuperConcepts.
In a recent blog post, the SMSF service provider’s executive manager of SMSF technical and private wealth, Graeme Colley, said if a late-lodging fund had their details removed on the SFLU system, the compliance impacts could mean they would be restricted in what investments they could make until the details were reinstated.
“Under the anti-money laundering laws, it is compulsory for investment houses and other financial service providers to undertake identification checks of investors,” Mr Colley said.
“When it comes to your SMSF, the investment house may use SFLU as an independent third-party check to confirm the fund’s identification and compliance status. If your SMSF’s compliance status has been removed, you can expect in some circumstances that the fund will be prohibited from making certain investments depending on the policy of the investment house.”
Mr Colley said for those funds who were changing from an individual to a corporate trustee, this could also be problematic in terms of possibly restricting any late-lodging funds which had their details removed from transacting on their SMSF bank accounts.
“The change [of structure] will require the trustee’s name as the legal owner of the investments and will require updating to reflect the change. This will require the fund trustee to notify the relevant financial institution with details of the change, and as part of their policies, they may use the SFLU to confirm the fund’s compliance status,” he said.
“If the compliance details have been removed, it is possible that your SMSF may not be able to transact on its bank accounts.”
Based on ATO data around the incidence of late annual return lodgement, Mr Colley said up to 90,000 SMSFs may be affected by the recent policy change, meaning SMSF professionals should ensure they lodged on time where possible.
“Obviously, the best way to avoid your SMSF’s regulation status being removed is to make sure the fund’s annual return reaches the ATO in time,” he said.
“In a perfect world, this is achievable. However, the ATO’s SMSF annual return lodgement records show that between 85 and 90 per cent of SMSF returns are generally lodged on time each year, so not all of them make it on time.”
