SMSF Adviser Technical Strategy Masterclass Day 2 wrap: ATO reports spike in high-risk, unrectified ACRs

This was followed by Cooper Grace Ward Lawyers partners Scott Hay-Bartlem and Clinton Jackson who discussed some of the risk areas with SMSF property and loans and how to navigate some of the recent changes in this space.

ATO assistant commissioner Justin Micale then provided an update of what’s currently on the ATO’s radar.

Mr Micale explained that one of the key focus areas for the ATO at the moment is unrectified regulatory contraventions.

“We have found this to be the most significant factor contributing to the outstanding lodgement of SMSF annual returns,” Mr Micale said, speaking at the virtual event.

While the percentage of auditor contravention reports (ACRs) compared to the number of SMSFs still remains at a relatively low level of around 2 per cent, he said the ATO is concerned about the “22 per cent increase in contravention reports from auditors”.

“We are [also] concerned about the increasing trend in high-risk and unrectified reports, which now sit at 28 per cent and 55 per cent, respectively,” he said.

Mr Micale stated that when trustees operate an SMSF with unrectified regulatory contraventions, they are placing their SMSF assets at risk.

“The most common contraventions involve loans, in-house assets and separation of assets,” he said.

“A behaviour we’re seeing with loans is that money that has been released to members, usually reported as a loan but on further investigation we discover that it’s not legitimate and the retirement funds are being accessed early.”

In terms of in-house contraventions, a common example is where trustees lease an asset of their fund to a related party.

“Lastly, regarding asset separation issues, we observe that some SMSFs fail to manage their fund’s investments separately from the personal or business investments of members. For example, they fail in ensuring that the assets are held in the fund name,” he explained.

“How we respond when we see unrectified contraventions really depends on the nature of the breach, the sanctions available to us under the law, and the compliance history of the trustee.”

Mr Micale reminded SMSFs that the ATO has a broad range of sanctions available, including remedial approaches such as issuing a direction to educate, imposing administrative penalties, accepting enforceable undertakings or issuing a direction to rectify.

“Alternatively, the removal pathway involves disqualifying the trustee or issuing a notice of non-compliance, resulting in the loss of the SMSF’s concessional tax treatment,” he said.

“We have been active in applying enforcement action where necessarily and, consequently, we disqualified 221 trustees last financial year.”

Day 2 finished with a comprehensive update on the policy and regulatory changes impacting SMSFs by Deloitte partner and national SMSF leader Liz Westover.

The winner of the SMSF Adviser daily survey prize, sponsored by Accurium is Sachin Kalla, Ashfords Superannuation.

The overall points winner of the SMSF Adviser technical strategy masterclass, sponsored by Lonsdale, is Ashok Aggarwala, Ak & N Aggarwala Brothers Pty Ltd

The Lonsdale prize giveaway for the $250 voucher went to  Darrell Payne from Financial Pathfinders Pty Ltd,

The Aquila Super prize giveaway for Apple Airpods was won by Kim Chapman from M R Hibbert & Associates Pty Ltd

Finally, the Act 2 Prize giveaway went to Teddy Kosasih from PittMartin Tax

If you missed any of the sessions, you can access the recordings on the virtual attendee portal.

A word from our Principal Partner

Thanks to everyone who visited the virtual booths of our sponsors and Principal Partner of the event, Lonsdale Financial Group.

“Lonsdale is very pleased to be partnering with the SMSF Technical Strategy Masterclass to deliver high-level, specialist content to SMSF professionals, particularly during this period of significant change,” said Lonsdale chief executive Helen Blackford.

“Lonsdale has been working with accountants to build their aligned financial planning businesses for over 30 years. Our experience in this area means we understand what it takes for accounting practices to establish and execute their financial planning and strategic advice businesses, giving them the tools and resources they need for long-term growth and success.”