An insight into what the ATO is targeting with Self-Managed Super Funds (SMSF)

August 1, 2014

Peter Cramer

Recently I attended a session in Melbourne where the ATO was being interviewed about their concerns and areas of focus regarding SMSF’s. It was most interesting and I thought it might be useful to share this with you.

1. The ATO is focusing on breaches of the Sole Purpose Test, (i.e.) where the SMSF was set up for reasons other than to provide retirement benefits for the members.  The ATO is not happy if people are trying to get early access to their superannuation monies or entering into schemes that are not in the long term retirement interests of the members.
2. Avoid thinking you can put a house in your superfund and then you or relatives live in it!
3. They are looking into schemes that promote overseas “trustee training courses” in exotic locations! Basically a rort to access super money for a holiday…
4. The ATO warns of Trustees who think they are doing the right thing because they might be abiding by one rule (eg the transaction might be on commercial terms) but they are failing under another rule (eg cannot lend money to members or provide financial assistance).
5. The ATO adopts a score card for every SMSF!  The higher your score – the bigger trouble you are in! They keep track of the Trustees performance, history, breaches etc. and if it looks like they are not doing the right thing – the ATO may take serious action.
6. The good news:  the ATO is more interested in getting problems sorted out rather than attacking and levying fines.  The want the super money to be there long term, so want to work with Trustees to make sure it is protected and maintained for the right reason – i.e. retirement.
7. Auditors!  I found it very comforting that the ATO hates bad auditors – or those that don’t do a proper job!  The ATO believes that if an auditor is not finding errors or reporting breaches then he or she is not doing their job properly and the ATO will come looking!
   The ATO will take action against the auditor where they do not do a proper audit, and will attack the Trustee for not getting proper professionals to do the work.   I like this – because at GTP we ensure the audit function is real and treated seriously.  I am not impressed by some of the so called audits done by the former accountants of superfunds we have taken over – sometimes I wonder if they have just signed the paperwork and done nothing!
8. Remember also – the ATO has the power to order Trustees to do certain things, to sell assets, to pay pensions, to wind up a Fund, to transfer to a new fund – so it is preferable to be working with the ATO in times of trouble and to have things sorted out up front.
9. Finally – the new penalty provisions have been in since 1/7/14.  The ATO has the immediate power to fine Trustees for breaches – and this can run into very large fines (up to $10,200).  Fortunately the ATO says their first aim is to educate and get things fixed, rather than impose fines.  However – continual breaches will create problems for Trustees – so be careful and devote appropriate time and attention to your superfund!

I trust you find some of this useful.