ATO scales up SMSF compliance program as ACRs rise

“One of the ways we’re addressing this is to gradually scale up our compliance program, but we are doing so in a way that remains empathetic to the challenging situations many Australians are still facing,” said Mr Micale, speaking at the Tax Institute’s Superannuation Intensive.

“This is why when we commence any compliance activity, we take time to understand the trustees’ circumstances and take this into account as part of our investigation.”

Mr Micale acknowledged that for those impacted by the devastating floods in Queensland and NSW, that “tax and super are not the number one priorities”.

“We’ve updated our website to explain the type of support we can offer during these difficult times,” he said.

While Mr Micale said the SMSF sector overall is displaying positive regulatory compliance, with 97 per cent of the SMSF population having no reportable contraventions during their audit in the 2021 income year, the ATO received auditor contravention reports (ACRs) for over 13,800 funds.

“For those 13,800 funds, over 40,000 contraventions were reported; this was an increase of nearly 10 per cent [compared with the previous year],” he said.

“So far for 2022, we’ve received ACRs for over 7,200 funds and 22,000 contraventions being reported; this is an increase of nearly 22 per cent in the number of SMSFs with ACRs lodged compared to the same period in 2021.”

Mr Micale said the two most common contraventions relate to reported loans to members and trustees not separating their personal and business affairs from their SMSFs. 

“The main drivers of regulatory contraventions are often financial stress, poor record keeping and a lack of understanding of the rules,” he said.

“How we respond to the breaches depends on a number of factors such as the impact of the breach on the fund, the compliance history of the trustee and their attitude to meeting future regulatory obligations.”

Mr Micale said the ATO treat would treat a simple mistake very differently from someone who shows blatant disregard for the law.

“In 2021, we disqualified 205 trustees and other contraventions attracted administrative penalties. This can have wide-ranging impacts as the disqualifications are published and the penalties can be significant,” he warned.

Some SMSF trustees are not aware of the fact that every instance of illegal early release may attract its own penalty.

One of the ATO’s other compliance programs, he said, is focused on identifying SMSFs involved in inappropriate tax-planning arrangements and is linked to the ATO’s high-net-worth individuals program.

“We have a particular focus and regularly monitor SMSFs with high asset balances to ensure they’ve acquired their assets within the regulatory framework and are appropriately accessing superannuation tax concessions,” he said.

“The most common risk we encounter in this area is non-arm’s length transactions arising from related-party dealings. This often involves the undervaluation of assets acquired from a related party.”