There has been plenty of debate in recent time within the media and SMSF industry regarding the proposed non-compliance of SMSFs that do not lodge their outstanding prior year (2009 and earlier) SMSF Annual Returns by 31 August.
Whilst many experts within the industry have been stating that this is not enforceable by the Commissioner, I believe that they do have scope to make certain SMSFs non-complying by virtue of non-lodgement of their annual returns.
It seems impractical that the ATO would take such an aggressive stance on fund’s who may have only the 2009 financial year outstanding, however for those trustees who have 2 or more years to lodge, it appears that the Commissioner has simply grown sick and tired of these irresponsible trustees. It is these trustees who continue to give a bad name to a sector recently referred to by the Cooper Review Panel as “largely successful and well-functioning”.
So how can the ATO look to enforce non-compliance of these SMSFs?
If you look at Part 4 of the SIS Act (sections 35 & 36), these sections cover the requirements for superannuation fund accounts, audit and reporting obligations. Sections 35A, 35B and 35C(2) all form part of the compliance audit to be undertaken by an independent auditor. It is however section 35D that outlines the responsibility for SMSF trustees to lodge annual returns each year.
I have included an extract of Section 35D below and highlighted the key points regarding the ATO dealing with non-lodgement of these returns:
(1) Each trustee of a superannuation entity that was a self managed superannuation fund at any time during a year of income must, within the reporting period, or within such longer period as the Commissioner of Taxation allows, ensure that the Commissioner of Taxation is given a return under this section.
Period for lodgment
(2) The reporting period is the period that begins at the end of the year of income and whose length is:
(a) prescribed by the regulations for the purposes of this paragraph; or
(b) if the length of the period is not prescribed—specified, by legislative instrument, by the Commissioner of Taxation.
Form of return
(3) The return must:
(a) be in the approved form; and
(b) contain the information required by the form in relation to the fund in respect of that year of income or in relation to another year of income, or both.
So, what does all this mean?
As we know the 2008 financial year introduced the consolidation of the income tax return, regulatory return and supervisory levy into one return known as the SMSF Annual Return. When section 35D talks about the lodgement of a “return”, it is referring to the Regulatory Return.
By virtue that the income tax return not being lodged means that the regulatory return has also not been lodged, which is a clear compliance breach of section 35D of the SIS Act.
Therefore, the Commissioner appears to be clearly conveying to trustees to get your funds up-to-date to meet its reporting obligations. It does appear that they are moving from educator to enforcer on this matter.