‘3 strikes and you’re out’: ATO eyes 80,000 late SMSF returns
The ATO has launched a new compliance campaign aimed at driving the lodgement of SMSF annual returns as it chases 80,000 late returns.
Speaking at the SMSF Association National Conference 2021, ATO assistant commissioner, SMSF Segment, Justin Micale said that while the illegal release of super in SMSFs is a continued concern for the ATO, a stronger focus will be placed on the non-lodgement of SMSF annual returns.
Mr Micale revealed that even with the due date for lodgement of the 2019 SMSF annual return being deferred until the 30th of June 2020, the ATO is tracking around an 86 per cent lodgement rate.
“This means that there are still around 80,000 funds yet to lodge this, so we’ve still got some work to do in this area,” he said.
“We understand it’s been a difficult time and we want to help you where your clients have run into difficulties.
“Our message for this group is simple: if you are experiencing difficulties with lodging outstanding returns, contact us and we’ll help you get back on track.”
While there are many reasons for an SMSF to stop lodging, including people experiencing difficulties as a result of COVID-19, Mr Micale noted recent ATO data also showed that lapse lodgement is often an indicator of broader regulatory issues.
“We’ve found that where an SMSF has an unrectified regulatory contravention in a prior year, they often fail to meet their lodgement obligations in subsequent periods,” he said.
“In recent years, there’s also been an increase in the number of new SMSFs established that failed to lodge their first SMSF annual return.
“This is particularly concerning where we can see a subsequent rollover into this SMSF, as this is a strong indicator that an illegal early release may have occurred.
“Non-lodgement and illegal early release go hand in hand, so you can see why we have a strong focus in these two areas.”
Mr Micale said the ATO will ramp up its messaging about the importance of lodging on time and will be starting a communication campaign where a series of letters with escalating warnings will be issued.
“I suppose you could call it a three strikes and you’re out campaign,” he said.
“Our new approach is to firstly help and support trustees. Our initial blue letter will let them know they are required to take action and lodge their return.
“If we don’t get a response to this letter, we’ll issue an orange letter warning of the potential consequences of not lodging their return.
“This includes imposing failure to lodge penalties for all overdue years, raising default assessments for each year of non-lodgement with penalties of up to 75 per cent, issuing a notice of non-compliance and/or disqualifying the trustee.”
Mr Micale said if the ATO still doesn’t get a response, then it will issue the final red letter which is basically a show cause letter instructing the client to tell them why they shouldn’t be subject to any of the consequences as outlined in the previous letter.
“We’ll be reasonable in our approach to this. For instance, if trustees respond to the issuing of a notice of non-compliance by promptly lodging all over SARs and committing to lodging future SARs on time, we’ll consider a vote revoking this notice,” he said.
“It’s important for us to protect SMSFs that are doing the right thing, so we are very serious about getting on top of this lodgement issue.”

Tony Zhang
Tony Zhang is a journalist at Accountants Daily, which is the leading source of news, strategy and educational content for professionals working in the accounting sector.
Since joining the Momentum Media team in 2020, Tony has written for a range of its publications including Lawyers Weekly, Adviser Innovation, ifa and SMSF Adviser. He has been full-time on Accountants Daily since September 2021.
- Fine every late tax return on 16 May each year automatically. And do not remit these fines under any circumstances. If a Taxpayer cannot lodge by 15 May it should have to submit its reasons prior and include when they will be able to lodge by.. This would be great for tax agents and the ATO. Right now taxpayers know that there are no penalties for late lodgement (and if penalties are levied they will just be remitted on request anyway). It’s really not complicated.0
- If the laws were less complex, perhaps more funds would be lodging on time?0
- If the laws are too complex for someone, then they shouldn't have an SMSF.0
- The laws are too complex for anyone. I've been working (specialising) in SMSFs for over 20 years and do many many hours of CPE every year. These latest lot of changes are ridiculously difficult and only about to get harder with the indexation complexity. Simple Super it is not.0
- How many new SMSFs are established online by the trustee? If they went to a licensed accountant they would get smsf advice. To avoid having to pay for these SOAs an accountant needs to issue they go online where they can tick the disclaimers stating no advice is being given. How these online groups can get away with 'first year free' is a joke. I'd be interested to know how many new SMSFs are registered this way. ASIC is so concerned about accountants provided advice yet you can go online and establish a SMSF in minutes without any guidance to your trustee responsibilities
0- I coudn't agree more! This really grinds my gears as I pick up so many SMSFs every year that have been set up with $30,000 $40,000 $50,000 $75,000 online with no advice! Totally inappropriate. How are these online operators allowed to offer their services like this when you can set up an SMSF with no advice and then go on to use their administration services but an Accountant has to have a licence and issue an SOA. I have even had a client I refused to set up an SMSF for because their balance was too low say "I will just do it online then". ASIC really needs to look at this.0
- Are you referring to esuperfund? I had an SMSF established via them, changed my mind on setting up the Commsec portfolio and cash account after the forms were handed in. Their response? We then have to cancel establishment of your SMSF entirely (then here's the part they didn't say - "because Commsec will no longer pay us a commission, to make your fund setup 'free'". Haha so not really free after all. I was ticked off because the ASIC fee to setup the trustee company had already been paid. As they say, no such thing in life as a free meal!0
- Agree to that. I myself have been reminding a few clients for their obligation to lodge for as far as FY2018 but continued to ignore. So I decided to take them off my clientele. A fine makes them keep up with the lodgement for sure.0
- It is not always the tax agent that is to blame. Some clients are simply too busy and think the outstanding lodgements won't catch up with them. I welcome this change especially for clients with a number of years in overdue SMSF returns. Some clients seem to fall through the cracks and while the ATO sends letter after letter, they don't follow up with any real action.0
- A lot of ATO announcements are reminiscent of the school headmaster stating that "unless the behaviour outside the tuckshop improves I will have to do something".
As John C points out, the ATO knows exactly who lodged the last SAR and who the tax agent is that arranged for the ABN and TFN to be issued.
Some serious use of its database could achieve a lot.0 - Who are the Tax Agent's with many of these returns not lodged? Are they being actively investigated by the TPB and ATO also? I have 30 SMSF's of my own and audit 7-8 firms and I am 100% lodged and of the firms I audit I'd say out of 500 funds there is 2-3 not lodged, where are all the non lodgments sitting???0
- I agree it would be interesting to know the split here!0
- I would hazard a guess, and suggest that many are self-lodgers either lost in the mire of regulation or trying to avoid scrutiny. If they are agent-prepared, then surely it's a pretty simple phone call by the ATO to ask where is it.0
- If the ATO enforced any fines to begin with this would be a good start.0
- I've had a SMSF that has been late lodging it's returns since 2016. Just recently we finally lodged 2018,2019 and 2020. Not once have they received a warning or fine from the ATO. No wonder the trustees don't care.0