The Deputy Commissioner at the recent National Conference of the Institute of Chartered Accountants said that in relation to self-managed super funds “we then focused on education … we’re now concentrating on taking firmer action”

By way of example he quoted that in 2006 only 12 funds were made non-complying and in 2010 185 were made non-complying. In 2008 no super fund auditors were referred for disciplinary action. In 2010 thirty auditors were referred for disciplinary action and eleven disqualified.

A major area that the ATO is focusing on is super fund auditors. They obviously see that by placing pressure on auditors to maintain a high standard that they will, in turn, be taking firmer action with those with self-managed super funds. This financial year they are going to be undertaking 1,000 visits on auditors. Through this process they hope to see a greater level of contravention reports issued, currently, only 2% of funds receive a contravention report and this is not enough for the ATO.

These higher standards are reflected in the auditors we now use. At present, there is a mixed range of standards amongst auditors out there. However, the action of the ATO will lead to a consistently high and strict standard.

Self-managed super funds are highly regulated and while the broad rules, such as the sole purpose test (no personal benefit from fund assets), not borrowing etc are understood there are many technical areas were funds breach the rules that are more complex. This is the case for example with the in-house asset rules which place a restriction on super funds investing in a related party, such as a unit trust.

This, unfortunately, happens when an area becomes more controlled, the approach becomes technical as well as substantiative.

If your fund breaches any of the regulations the auditors must issue a contravention report. They do not have discretion. The report is lodged with the ATO. If you have remedied the breach or are in the process of doing so this is mentioned in the contravention report and that is the end of the matter. If you decide not to remedy the breach the current practice of the ATO is, after they get around to reviewing your contravention report, write to you to ask what you intend doing to rectify the matter and will agree a time frame to rectify the matter.

The funds that are made non-compliant are those that fail to cooperate with the ATO, after repeated requests. This is the ATO’s big stick of last resort. The consequences are that the assets of your fund are taxed at 46.5%.

By ensuring a high standard in your fund and working with auditors of high standing we are placing your fund in a strong position so that non-compliance is not an issue. If you are unsure about any transactions, we would recommend that you give us a call to check it out before proceeding.

Self Managed Superannuation Fund – Trustee Education Tool

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