The survey found that the percentage of funds with reportable contraventions remained relatively stable at 5% in 2013/14, down from 5.3% in 2012/13. The increase in SMSF borrowing contraventions was offset by a decrease in loans to members (23.3%) and in-house asset contraventions (20%). The averages for these contraventions since the survey began in 2007/08 is 32% and 36% respectively.
In the recently published speech to the SPAA national conference Alison Lendon, Acting Second ATO Commissioner, explained the ATOs SMSF compliance focus.
While acknowledging one of the roles of the ATO is to “ensure the health and security of this sector”, which Lendon thought was “in good shape”, the ATO does sometimes need to take “firmer actions”, such as those taken in 2012/13:
- 150 SMSFs were made non-complying
- 440 people were disqualified from being an SMSF trustee
- 513 enforceable undertakings were entered
- 70 funds were wound-up following audits
- 438 funds were removed from the Super Fund Lookup database pending investigation for illegal early release schemes
However the ATO “usually prefer[s] to work with trustees and their advisers to rectify contraventions wherever appropriate”.
The ATO has announced a new system for responding to Auditor Contravention Reports and new penalties for SMSFs behind on lodgements of the Annual Return.
New ATO response to auditor contravention reports
The ATO has announced a change to the treatment of contraventions reported through the Auditor Contravention Report. Previously when a contravention report was received the ATO would send a letter confirming receipt of the report, but there could then be a significant amount of time, in some cases years, before an ATO audit commenced.
Under the new system the ATO uses ‘risk models’, which process information including “regulatory and income tax matters, … the SMSF annual return, ACRs and other data including trustee and members’ records”, to triage the auditor contravention reports into three risk categories, high, medium and low risk.