The Treasury recently released for consultation a range of miscellaneous amendments to portfolio laws which include a significant change to the reporting obligations for SMSFs.
The explanatory statement states that the new regulation will require the accounts and statements of an SMSF to be prepared at least 45 days before the day by which section 35D of that act requires a return to be lodged for the entity.
“This is the same day by which an approved SMSF auditor must be appointed under subsection 35C(1) of that act,” it explains.
Smarter SMSF chief executive Aaron Dunn said the application of the amending regulations will apply in relation to the accounts and statements for all funds.
“These proposed changes would align the finalisation date of the financial statements with the final date that an SMSF auditor can be appointed for an income year by the fund trustees,” Mr Dunn said.
With the different lodgement dates that apply for SMSFs, Mr Dunn said this 45-day period could mean in some instances the financial statements would need to be finalised by 16 September, less than three months after the end of the financial year.
He noted that some funds may not even have all the fund information required in order to complete the financials by this stage where they’re waiting for tax statements or details of distributions from other trusts.
“Such a decision to impose this measure could arguably lead to trustees ‘backdating’ the signing of financials to ensure compliance, something that doesn’t serve the trustee or regulator any type of satisfactory outcome,” he stressed.
Where trustees breach the requirements in section 35B of the SIS Act, Mr Dunn said an administrative penalty of 10 penalty units applies.
“This could mean a penalty of $2,220 each for individual trustees, or $2,220 for directors of a corporate trustee where they are joint and severally liable,” he added.
“This certainly seems excessive in the context of the fund’s due date for lodgement of the SMSF annual return still 45 days away. Even more so, when you consider that an auditor is required to provide an audit report to the trustees within 28 days of having received all relevant [documents] to undertake the audit.”
SMSF Association deputy chief executive Peter Burgess agreed that it would be unreasonable for an SMSF, which lodges their SAR on time, to incur an admin penalty because they failed to have their financial statements prepared 45 days prior.
“Currently, the SAR doesn’t have a field for the date the financials were completed, so it’s also not clear how the ATO would monitor this,” Mr Burgess said.
Mr Burgess said the amendment is most likely being contemplated to reduce instances of late lodgements and illegal activity.
“While we obviously support measures to improve compliance, in this instance, we are not convinced imposing another statutory deadline, and giving trustees less time to prepare their financial accounts each year, is the best approach,” he said.
Following the recently released ATO Law Administration Practice Statement on the application of admin penalties, Mr Burgess said it is likely that a remission would apply in situations where the SMSF had lodged their SAR on time but not their financial statements, but this would depend on the circumstances of each case.
The Treasury is seeking consultation on the amendments until 17 November.
Just plain STUPID ‘IDEA’!
No sense shortening account preparation time if current enforcement tools are not used.
These people have gone crazy. No grasp of the real-world whatsoever. Meanwhile the big end of town does whatever it wants.
Bureaucracy gone crazy. Haven’t they heard of regulating for outcomes than fixating on intrusive process? And what does finalisation mean: if either internal checks or audits reveal a need for change in accounting, would the 45 day rule ban it? And can the taxpayer demand $2220 from each ATO employee when ATO systems fail?
Obviously some Canberra Boffins think SMSF preparation is merely a push-button job and the software does it all for you too. Have they any real-world experience? I think it should be mandatory for anyone working in Treasury that are responsible to make decisions affecting the profession at large, to have spent at least a decade working in the profession before being permitted to make such ludicrous laws. Preferably a small business where the buck stops with you!
I don’t know about the rest of our profession, but as a small practitioner the JobKeeper program has taken up 10% of my time these past 6 months. Constant rule changes, always checking and rechecking with clients to determine eligibility so they don’t miss out, collating monthly reporting, permissions to lodge, copies of documents, more rule changes . . . .Exhaustion is an every day event. And then to read this ….. If they want 45 days before, then the lodgement due date must be moved to 30 June every year. That would maintain the status-quo almost! Otherwise you are then asking practices to prepare maybe 90% of their work within 75% of their year. Read this to mean UNreasonable!
Crazy. You don’t get listed trust distribution statements till the end or after 30 September..
Right! I have several clients that we have started work for that are still waiting on tax statements. It is 5th November. Never mind the SMSFs that have invested in private companies or trusts that have until May to lodge as well. Looks to me like someone needs to come up with ideas for legislation to justify their job.
Why don’t they just get the f**k away from SMSF’s for a period and let us all just get on with our jobs?
Simpletons with no clue making rules with no benefit. That is unless they’re actually aiming to assist union industry funds which is my suspicion.
If they disenfranchise this area too much and SMSF’s start dropping it literally could cause unforeseen financial issues across the nation. If it ain’t broke, don’t f**k it up for no reason!
Whoever ‘thought’ of this crazy idea should be forced to put their name on it. Do these nutters think that SMSF work is all that we do?
This proposal is totally impractical. Its inclusion for consideration at all is concerning as it indicates a lack of understanding of the administration process and its challenges.
Deary me, THE DUE DATE IS THE DUE DATE as far as I am concerned.
This is achievable [b]ONLY[/b] if there is sharing of investment data between share registries, brokers and platforms. For investments nearly all the platforms are up to date on a daily basis, complexity arises for trust distribution annual statements which in some cases are NOT available until late September. Excluding trust distributions, our reports are ready on the 1st of the new financial year.
Section 166 SISA imposes an admin penalty for breach of s35B. The “problem” seems to be that, with no date to complete enshrined, this makes the application of a penalty difficult. If a date is deemed necessary, why would it not be 28 days to coincide with the time the auditor has to complete the report? Or even more sensibly, “prior to the lodgement due date”?
Consultation ends on 17 November.
I suppose the question that needs to be asked is what problem are they hoping to solve (with those proposals)?
What is the purpose of this proposed amendment?