The ATO is targeting the tens of thousands of SMSFs it has identified as late in lodging their SMSF Annual Return, or having never lodged at all.
Dana Fleming, ATO Assistant Commissioner for Superannuation, told the SMSF Association National Conference that the ATO had identified 64,000 ‘lapsed lodgers’ and just under 30,000 ‘never lodger’ SMSFs.
Late lodging SMSFs
SMSFs in the ‘lapsed lodger’ category had an average of 3.4 overdue SMSF Annual Returns. About 4,000 of these funds had an Auditor Contravention Report lodged with their last annual return.
The ATO started chasing this group with a targeted mail out, coordinated with the Tax Practitioners Board, to the 2,728 tax agents and 570 SMSF auditors who have an SMSF with overdue lodgements.
“This group was the first cab off the rank in our lapsed lodger program because we have the highest expectation of tax agents and SMSF auditors, given their professional standing and role in maintaining the integrity of the system. We also know that poor compliance by this group tends is correlated with poor compliance by their clients,” Fleming told the conference.
30% of these professionals are now “back on track”. Fleming said the ATO would refer the remaining 70% for audit if they aren’t actively working with the ATO on their overdue lodgements.
“We’ve also started to contact the full population of lapsed lodgers to encourage them to bring their overdue lodgments up to date. We’re encouraging them to contact us if they need assistance,” Fleming said.
“We’ve also removed SMSFs with lapsed lodgments from SFLU [Super Fund Lookup], which means they can no longer receive contributions or rollovers.”
The ATO has also identified approximately 26,000 SMSFs of the 64,000 late lodging funds which are overdue in lodging their Annual Return for the first time.
“Given our finding that once SMSFs stop lodging for the first time, they often stop lodging all together, we have an increased focus on those SMSFs who have not lodged for the first time as a preventative action against potential long term non-lodgment.”
The ATO is contacting these funds to let them know that not lodging can put their compliance status at risk and they could be removed from SFLU.
Never lodged SMSFs
Fleming said that the ATO was paying “very close attention” to the approximately 6,500 SMSFs which registered in 2017 but haven’t lodged their first Annual Return – which was due on 28 February 2018.
“We’ve contacted all these funds. Where they received a rollover we’ve asked them to lodge or contact us if they need help. These may just be a group of the early ‘strugglers’ who are new to the system or there could be potential IER [Illegal Early Release].”
“Where there was no rollover and it appears the SMSF has never operated, we’ve asked them to cancel their registration if this is the case.”
“If we don’t get a response, we’ll take the fund off SFLU and for those where we can see there has been a roll over, take action on the basis there has been IER.”
The same action will be taken for new SMSFs which had Annual Returns due on 28 February 2019.
When it comes to long-term never-lodging SMSFs, Fleming said the ATO had uncovered some “sobering facts”. There has been a steady increase in the number of these funds over the last five years, with “just under” 30,000 SMSFs registered between 2013 and 2018 having never lodged (including the 6,500 SMSFs not lodging their first year Annual Return).
Over 50% of these SMSFs appear to have received a rollover from an APRA-regulated super fund. Also the average amount of these rollovers has been increasing, from $78,000 in 2013 to $140,000 in 2017.
The age of these never-lodging SMSF trustees also skews younger, with an average age of 36. This compares to an average age of 58 for the SMSF population as a whole, based on ATO statistics for the 2015/16 year.
“We’ve undertaken a pilot of 200 funds to understand this population,” Fleming said.
“Our analysis shows a variety of reasons for never lodging. Some trustees have never operated, some admitted to IER and some have brought their lodgments up to date. We’ll be doing a mail out within the next few months to the entire never-lodged population.”
“As with first-year non lodgers, where funds haven’t received a rollover and it simply appears the individual never operated the SMSF, we will ask them to cancel their registration. Where they have received a rollover, we will ask them to lodge and take further action if they fail to do so.”