Ben Kelly, ATO deputy commissioner, told delegates at the SMSF Association annual conference on Wednesday that there are more than 93,000 SMSFs who have one or more outstanding lodgements as of 31 December 2025, including 20,000 that have never lodged an SAR.
“Lodgment is the cornerstone of compliance. It is how trustees can best demonstrate they are meeting their legal responsibilities. It is also how the integrity of the sector is monitored,” Kelly said.
“The highest-risk group seen by us are SMSFs that are set up, roll over their super, and then never lodge a return. Almost 40 per cent of these funds end up illegally accessing their super, and the value of illegal early access in this group rose by nearly 40 per cent last year.”
He continued that in the experience of the Tax Office, timely lodgment is generally a marker of a fund operating within tax and regulatory guardrails.
“We are nevertheless aware that there are some issues that can impact lodgments of returns for SMSFs who are trying to do the right thing,” he added.
Kelly said there are a number of other areas on which the ATO will be focussing in 2026 including illegal early access.
For the 2022–23 financial year, the ATO estimated that $252 million was accessed early from SMSFs without a condition of release being met, slightly up from $250 million the previous year.
“While the increase is modest, the figure itself is significant and with this being our fourth consecutive year where we have undertaken a program to estimate the illegal early access risk, it tells us this issue isn’t going away,” Kelly said.
“Of greater concern is that the level of prohibited loans has surged. In the 2022–23 financial year, our prohibited loan estimate jumped to $398 million from the 2021–22 published figure of just over $231 million.
“Some part of this increase – around $50 million – is attributable to us for the first time making an estimate of the level of prohibited loans in SMSFs that have not lodged a return. Nevertheless, even after this one-off impact has been taken into account, this represents an increase of around $115 million in one year.”
Furthermore, he said, analysis indicates that most cases of illegal early access and prohibited loans involve newly established funds that never intended to operate as genuine superannuation funds.
“Instead, they were set up as conduits for short-term finance, often facilitated by promoters who target vulnerable individuals and charge exorbitant fees,” he added.
“We also know that SMSFs with balances below $200,000 are the most likely to engage in illegal early access, with just over 80 per cent of all cases coming from this group.
“Finally, and more generally, intelligence from our compliance work points to there being three main drivers for illegal early access and prohibited loans: financial stress; lack of knowledge, and personal issues, such as relationship breakdowns.”
He continued that it is important to reinforce that the super system is a vital national asset and provides a deep pool of resources for investment and is critical in offering a ballast for the demands an aging population will place on the country in the future.
“What does this mean for the SMSF sector? For my part, I believe this only serves to emphasise the essential role of strong governance in protecting individuals’ retirement savings. This responsibility cannot be overstated,” he said.
“From the ATO’s perspective, governance is far more than ticking compliance boxes. It’s the foundation of trust and confidence in the SMSF sector As the sector grows and evolves, governance remains the cornerstone of credibility and, together, we must lead the way in setting and maintaining that standard.”
He added the ATO continues to see behaviours that fall well short of this standard and “shifting” this behaviour requires a collaborative effort.
“It cannot rely solely on the actions and influence of the regulator. In this regard, I particularly acknowledge the importance of SMSF professionals who support individuals to manage their own retirement savings and the key role they play in ensuring we maintain good compliance in the sector,” Kelly said.
Should it be mandatory that someone opening an SMSF has an interview with a representative from the ATO before the ATO permit this type of entity to be opened?
If you are borrowing large sums of money from a bank, you generally have a meeting to arrange it.
The ATO put out bulletins and require documents to be signed such that people are aware of their obligations, but is this enough on your part? Signing papers doesn’t give the taxpayer integrity!
If you interviewed you may find who the promoters are and you’d shut this behaviour down more quickly. I believe the ATO need to do more. Don’t facilitate this behaviour by even providing the TFN to start with.
Genuine taxpayers comply with requirements. They may grumble, but most understand that additional work is required.
Because of the “sins of the few”, the many suffer!