Staff shortages blamed for huge drop in on-time lodgements
The pandemic, natural disasters and crypto also caused hold-ups according to Class annual report.
A huge drop-off in on-time lodgements has been put down staff shortages and problems related to COVID and natural disasters, according to the latest annual report from SMSF software firm Class.
On-time lodgements fell more than 10 points to 75.4 per cent in 2020-21, according to the 2022 Class Annual Benchmark Report, an annual publication which explores SMSF data across financial years.
Class said it was concerned that many agents and trustees had been hit by COVID and asked for extensions.
But that issue had been overtaken by awareness that natural disasters, particularly the floods, plus staff shortages had played significant roles in the lodgement slowdown.
“While our initial assumption about lodgement delays was attributed to the global pandemic, staff shortages/turnover and flooding have also adversely affected both accounting practices and trustees of affected SMSFs,” the report said.
It pointed to a recent speech by the ATO’s director of superannuation & employment obligations, Paul Delahunty, on current compliance issues and said industry trends might have identified more sinister causes.
These included the number of newly established SMSFs failing to lodge their first return growing significantly from 3 per cent in 2013 to more than 26 per cent in 2020.
“This is particularly concerning if the ATO can see there has been a rollover into these SMSFs, then this is a strong indicator that illegal early release may have occurred,” said the report.
The trend toward new funds would exacerbate the problem, with many new trustees unaware of all the compliance obligations.
“While people taking control of their finances is encouraging, it’s important to understand what is required with managing a SMSF as we’ve identified delays occurring in lodgments times.”
Another potential hold-up came from the popularity of digital currency and issues surrounding its value.
“There was also an increase in new registrants investing in crypto during 2021 with 4 per cent reporting crypto investments. This trend is likely to increase in FY21 and FY22,” the report said.
“While SMSFs investing in crypto is not prohibited, it does introduce significant volatility, and liquidity, valuation and compliance challenges that often lead to delays in the lodgement of returns.”
It also drew attention to the fact that more than 99 per cent of SMSF returns are lodged via tax agents and a revised standard, effective from 1 January 2020, meant an SMSF had to be audited by a separate firm from the one preparing its financial statements.
This affected more than one-third of funds, according to “anecdotal evidence from the ATO”, which allowed a transitional period for lodgement deadlines to allow for the extra workflow.
