ATO Endorses SMSF Sector
Assistant Commissioner, Dana Fleming, gave an address at the CAANZ conference I was at recently. I thought a few of the highlights were worth sharing.
The ATO is very pleased with the level of compliance and lodgement timeliness of the SMSF sector. In fact, its metrics are better than any of the other sectors.
In the 2019 financial year there were 10,330 SMSFs with 27,719 contraventions reported. This is exceptional given that it means that there were no contraventions reported on over 98% of funds lodged. Of the contraventions, about 50% were rectified before they were reported. Most of the contraventions were loans (21%), in-house assets (18%) and separation of assets (13%).
The ATO’s response to an unrectified contravention depends on the nature of the breach, the compliance history of the fund, previous contraventions by the parties involved and the penalties available. Disqualifying a trustee or making a fund non-complying will only be considered as a last resort. To stay in the system, trustees may be given an education direction, a direction to rectify or an enforceable undertaking.
As an indication of the sector’s health it should be noted that, with around 600,000 funds in force in 2019, there were less than 500 enforcement actions. Of these, there were 26 notices of non-compliance and 145 disqualified trustees.
The SMSF sector is large and variable. That means there are both good and bad news stories. Given the focus that is enthusiastically given to the negative aspects – real, imagined and manufactured – its great to have the endorsement of the regulator – the one that matters, not the other one.