Self-managed super funds compliance

In a speech last week Michael D’Ascenzo, Commissioner of Taxation  explained the ATO's approach to SMSF compliance under the new super rules:

"We plan to increase our active compliance resources to 590 employees and increase our compliance checks of self managed superannuation funds and approved auditors. For new self managed superannuation funds we will be introducing a compliance verification program along the lines of the GST advisory visits to establish positive compliance behaviour early in the life cycle of the fund....

As the new arrangements are bedded down, we will identify and correct non-compliant behaviour by adopting an appropriate balance between help and education services and active compliance activities.

For example, where a fund does not meet the legal definition of a self managed superannuation fund we will give trustees an opportunity to restructure the fund without losing their complying status. However where there are serious or repeated contraventions we will take firmer action.

Experience in other areas such as GST demonstrate that contacting the taxpayer at an early stage is effective in reducing non-compliance and gets funds on the right track from the beginning. The early intervention strategy allows us to identify educational needs and prepare specific educational products and compliance reviews for new entrants...

We have received over 10,000 Auditor Contravention Reports as at 31 December 2006 from 9,906 auditors since reporting commenced on 1 July 2004. The number of contraventions reported were more than 16,000. Of these about half were reported as unrectified (50.6% of total contraventions). Key contraventions are:

• loans made to a member or a relative (18%),
• assets not in the name of the fund (16%),
• breach of in-house asset rules (14%);
• documents requested by auditor were not provided (11%),
• borrowings by the SMSF for purpose not allowed by the legislation (9%), and
• breach of sole purpose test (8%)."

It's clear that the ATO sees superannuation surveillance as an important function.