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.
I’ve been running at about 98% for 15 years, until 2021. Moving to new auditors did not help either.
Try asking the ATO for a private ruling. 7 months and still waiting.
Obviously 28 working day timelines don’t actually apply to the ATO and zero consequences of them being drastically behind.
As for Centrelink it is taking easily 6 mths for them to update Asset positions and then want Age Pensioners to repay the over payments because Centrelink are so far behind.
Got to love the Govt, DO AS WE SAY, Don’t Do As We do.
Supposedly us agents are being “listened” to by the ATO. More like listed to and mostly ignored.
They do give suspensions of action and rarely a proper deferral. Even that is like pulling teeth and takes AGES to update. The suspensions only mean a delay in fines which we then need to apply for remissions for on an individual basis. The clients also still get notices and demands then we get the calls wasting more time that we could be using to actually do work. They even send the messages to MyGov which freaks out the client.
Agree they remove the SMSFs from the lookup too early – even when they had approved and unprocessed deferrals they removed them causing flow on issues. It’s taking ages to get SMSF audits back too. Like 6 weeks. They remove within 2. ridiculous.
What if they just switched all of this off for those with agents struggling to get on top of it all with the reduced staffing we have? It doesn’t take much common sense to work out what is needed to get back on track. It’s majorly stressing us all out.
I often wonder what it would be like if all the Tax Agents went on strike, like teachers, train drivers, nurses… I mean no disrespect to these professions, but all it would mean is a holiday for the ATO, and even more work to catch on. I guess we could work on a go slow moment… any thoughts out there?
Oh My God have they just worked out we have issues with staff, work loads and deadlines? Might I suggest some blanket extension till we try and catch up?
They have forgotten about the record number of retirements who have not been replaced because of the reasons in the article.
Would be great if the ATO could have recognised these real world issues and given a generic lodgement extension, and delayed removal from super fund look up out to say 6 weeks. Separately targetting the new SMSFs not lodged, being a risk area as noted.