Top 10 SMSF compliance mistakes

The Tax Office has published a list of the top 10 types of compliance mistakes made by SMSF trustees. The data from which the list is taken is based on the type of contraventions reported by approved SMSF auditors since 2005 (when compulsory contravention reporting started) up to June 30, 2012.

The top 10 contravention types in percentage terms are as follows:

Contravention type Incidence % Proportion of assets %
Loan to members/ financial assistance 20.9% 14.4%
Dealing with in-house assets 18.3% 27.2%
Administrative contraventions 12.0% 1.8%
Separation of assets 12.9% 26.2%
Operating standards 8.3% 6.5%
Borrowings 8.0% 7.8%
Sole purpose 7.8% 5.7%
Investments at arm’s length 7.5% 7.4%
Other 2.8% 0.7%
Acquisition of assets from related parties 1.5% 2.3%

Of the top 10, three types of contravention represent more than two-thirds of the proportion of asset values (67.8%). These are, in order of asset value proportion:

  • in-house assets
  • separation of assets
  • loans to members/financial assistance.

The Tax Office has a number of options when dealing with SMSF compliance issues, including making the fund non-complying for taxation purposes, imposing civil penalties (or perhaps criminal penalties for more serious breaches), and possibly disqualifying a trustee.

As well, the Tax Office can issue rectification and education directions for contraventions, and an administrative penalty (which must be paid personally by the trustee or the director of the trustee company and cannot be paid or reimbursed by the SMSF).

Beware, non-lodging SMSFs

Word on the street is that the Tax Office has taken additional steps to engage with self-managed superannuation fund (SMSF) trustees to bring their lodgement obligations up-to-date. Over the past few months, the Tax Office has been writing directly to SMSF trustees with two or more lodgement obligations overdue, advising them that they will remove their regulation details from the Super Fund Register until they bring their lodgements up-to-date – or in the case of non-operating funds, wind up the fund.

If you are affected, consult this office for help on how to:

  • review your requirement to lodge, and
  • bring your lodgements up-to-date.

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Beware, non-lodging SMSFs

Word on the street is that the Tax Office has taken additional steps to engage with self-managed superannuation fund (SMSF) trustees to bring their lodgement obligations up-to-date. Over the past few months, the Tax Office has been writing directly to SMSF trustees with two or more lodgement obligations overdue, advising them that they will remove their regulation details from the Super Fund Register until they bring their lodgements up-to-date – or in the case of non-operating funds, wind up the fund.

If you are affected, consult this office for help on how to:

  • review your requirement to lodge, and
  • bring your lodgements up-to-date.

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