ATO reports ‘alarming increase’ in non-lodgment
A significant jump in the rate of SMSFs failing to file their first return has raised concerns about illegal early release.
Speaking at a recent conference, ATO assistant commissioner, SMSF regulatory branch, Justin Micale said one of the big concerns for the ATO at the moment is the rate of non-lodgment for SMSF annual returns.
Mr Micale said there are currently around 34,000 funds that have never lodged their first returns and a further 60,000 lapsed lodgers who have more than one outstanding return.
“The lodgment rate for the 2020 year is tracking at about 91 per cent,” said Mr Micale.
While lapsed lodgment may be due to trustees experiencing difficulties, it’s often an indicator of broader issues, he stated.
“We’ve found that when an SMSF has an unrectified regulatory contravention, it can be a pre-curser for failing to meet their lodgment obligations in subsequent reporting periods,” he told delegates at the Tax Institute’s Superannuation Intensive.
“There’s been an alarming increase in the number of funds failing to lodge their first annual return and become what we call never lodgers. This is not a good start to their journey as an SMSF trustee, particularly as we issue letters specifically to these trustees to remind them of their first lodgment due date.”
The number of newly established SMSFs failing to lodge their first return has grown significantly from 3 per cent in 2013 to over 26 per cent in 2020.
“For the 2021 year, we’ve only just passed the lodgment due date [for new SMSFs], but the percentage of outstanding returns for new registrants has increased again,” he cautioned.
“This is particularly concerning if we can see that there has been a rollover into these SMSFs as this is a strong indicator that illegal early release may have occurred.”
Mr Micale said the lodgment of SMSF returns remains a significant priority for the ATO.
“We have a comprehensive communication program in place to remind trustees of their lodgment requirements, including targeted mail-outs for those new to the system and those that have failed to meet a due date,” he said.
“While this approach does deliver positive results for the majority of trustees, there remains a persistent group who continue to ignore our reminders so we’re now targeting them with a compliance campaign called three strikes and you’re out.”
Mr Micale said the ATO is also urging SMSF professionals to bring any outstanding SMSF return lodgments for themselves or their clients up to date.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.