Less than 27 days remain for SMSF trustees to lodge their SMSF annual return (SAR) by 28 February 2024, regardless of whether the fund has received contributions, made income payments or is in pension mode.
If the SAR is more than two weeks overdue, the ATO may change the status of the SMSF to Regulation details removed.
The impacts for failing to lodge by the due date are:
preventing APRA-regulated funds from rolling over member benefits
discourages employers from making superannuation guarantee contributions
ATO compliance action
The reasons for or failing to lodge the SAR by 28 February can have significant financial, taxation and cost impacts including:
Reasons for rolling over from an APRA-regulated fund
1. To transfer savings to your SMSF because of the APRA-regulated fund’s high fees and underperformance.
2. To consolidate multiple accounts – the Productivity Commission has found that multiple accounts meant that members were paying $690 million in excess administration fees and $1.9 billion in extra insurance premiums per year, seriously eroding savings.
3. To manage and better control investment choices including combining savings of up to six members and consolidating them into a single SMSF.
Divorce or separation splitting orders
4. You have finalised your divorce / separation property settlement and you are required to split your APRA-regulated fund to your spouse’s nominated super fund. Usually, the property orders will specify a date when the split is to be effected.
5. Failing to comply with the property orders can put you at risk of an application by your spouse to force your compliance with the court order or an application to set aside the orders and replace them with new orders more favourable to them, and you may be required to pay your spouse’s legal costs of the application if you are found to have defaulted on the property orders.
Impact on employers
6. If employers are discouraged from making superannuation guarantee contributions or if payments cannot be made, this may give rise to a superannuation guarantee charge shortfall exposing them to significant costs, tax and penalties.
Penalties & ATO compliance action
7. Failure to lodge (FTL) and administrative penalties are imposed which is not a deductible expense. Individual trustees and directors of corporate trustees are personally liable to pay administrative penalties and cannot be paid from the fund.
8. Other courses of action the ATO can take to deal with trustees can include the following:
Notice of non-compliance – assessable income is taxed at 47% and an amount equal to the market value of the fund’s total assets less any non-concessional contributions is taxed at 47%
Education direction
Enforceable undertaking
Rectification direction
Disqualification of a trustee
Civil and criminal penalties
Winding up the SMSF
Freezing an SMSF’s assets
A critical part of an SMSF trustee’s legal responsibilities is lodging the SAR on time.
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