In the latest ASF Audits webinar, head of education Shelley Banton, said the ATO will look at the behaviours driving this type of activity and why people do it.
“The program is designed to gain intelligence about the behaviours of illegal early release and establish how much money will leave the system before it does,” she said.
“The ATO will be able to provide the SMSF industry with an estimate of the financial impact of illegal early release before it happens and bring that into the spotlight for the sector.”
Ms Banton said in 2022, 17 per cent of new SMSF funds failed to lodge their first returns, which “raises a red flag” to the ATO who can view it as a deliberate early entry into SMSF to gain illegal access of money.
“There’s another cohort that already exists in the system, and those trustees are already involved in illegal early access, but they’re not lodging their annual returns so that they avoid detection,” she said.
“When you translate this into member numbers for 2022, there were 32,000 members who failed to lodge their SMSF annual returns in that year, and of the trustees that did lodge their returns, 11,500 auditor contravention reports were lodged representing 20,000 contraventions, most of which were prohibited loans and a breach of the payment standards.”
Ms Banton said the ATO is already putting in preventative measures, which include looking at the new entrance review, which has already saved around $64 million from exiting super in 2023.
She added the regulator is already focussing on compliance standards and in 2023 disqualified 753 trustees, three times more than in the 2022 financial year, the majority of which were for illegal early access.
“The ATO is also continuing to look at ongoing illegal early access promoter investigations and identifying some interesting trends,” she said.
“They’ve got stricter policies in place for first-time non-lodges as well as SMSF professionals because unfortunately, there’s a lot of SMSF professionals involved in illegal early access as well.”
With the three-strikes penalty regime now in place, Ms Banton said the prospect is for harsher penalties and outcomes for trustees and SMSF professionals.
“The ATO is taking it very seriously and getting other agencies involved, including ASIC and the police,” she said.
“One of the policy responses being considered by Government is that you need to get approval to access your money before you meet a condition of release. That will have to be done through the government and as yet it has not been released in any form of draft legislation, but the ATO is thinking of tightening the noose moving forward.”
She added there are still around 15 per cent of funds, about 90,000, that haven’t lodged their returns for 2023, which is a significant number.
“One of the ATO’s biggest focuses is education and they are ramping up their training and penalties,” she said.
