Self Managed Super Funds (SMSF)

What to watch with your SMSF’s annual return this year

By Graeme Colley
Executive Manager, SMSF Technical and Private Wealth - SuperConcepts Sydney, Australia

Making sure you lodge the annual returns for your SMSF's returns in time have taken on a new meaning since September last year, and it’s one to watch in 2020.

From 1 October last year, if your SMSF has annual returns outstanding by more than two weeks after its required lodgement date, the ATO will remove it compliance status from Super Fund Lookup.

This new approach has stirred up the industry, as some think that removal of compliance status two weeks after the official lodgement date was far too short, while others had no sympathy for those who can’t get their returns in on time.

However, you feel about the cut-off date the ATO’s approach is a reality that must be taken seriously.

Removal of compliance status of your SMSF does not mean that the fund will be made non-complying, but it does mean that no one will be able to confirm the fund’s compliance status via the Super Fund Lookup.

So, what does it mean for an SMSF that has its compliance status removed? Well, it will not be possible to roll over benefits from an APRA fund to an SMSF, as the APRA fund will not be able to confirm the compliance status of the SMSF. This may not impact on most SMSFs, however, for new SMSFs that are expecting rollovers or funds that are winding up problems may arise.

Another impact is that employers who make contributions to SMSFs via SuperStream will not be able to make contributions to an SMSF where the fund’s status has been changed to ‘regulation details removed’. This may mean that the employer ends up making the contribution to the default fund and you will then need to sort out the web to get the amount transferred to your SMSF. It’s an unnecessary problem that you must avoid.

While the rollover and contribution issues create problems, there may be other wide-reaching consequences for your SMSF. Under the Anti Money Laundering (AML) laws, it is compulsory for investment houses and other financial service providers to undertake identification checks of investors. When it comes to your SMSF, the investment house may use the Super Fund Lookup as an independent third-party check to confirm the fund to confirm the fund’s identification and compliance status.

If your SMSF’s compliance status has been removed you can expect, in some circumstances, that the fund will be prohibited from making certain investments depending on the policy of the investment house.

The problem may not only impact on new fund investments. It may apply to an SMSF if the fund has changed its trustee structure from individual trustees to a corporate trustee. The change will require the trustee’s name as the legal owner of the investments will require updating to reflect the change. This will require the fund trustee to notify the relevant financial institution with details of the change and as part of their policies they may use the Super Fund Lookup to confirm the fund’s compliance status. If the compliance details have been removed it is possible that your SMSF may not be able to transact on its bank accounts.

Obviously, the best way to avoid your SMSF’s regulation status being removed is to make sure the fund’s annual return reaches the ATO on time. In a perfect world this is achievable. However, the ATO’s SMSF annual return lodgement records show that between 85% - 90% of SMSF returns are generally lodged on time each year, so not all of them make it on time. On these figures alone, it’s possible that about 60,000 - 90,000 SMSF annual returns could be late.

The ATO’s service delivery standards indicate that the fund’s status is updated within 21 days. You would hope that reinstatement of the fund’s status should happen as quickly as it was removed. If your SMSF’s compliance status has been removed it may pay you to monitor the Super Fund Lookup once the outstanding returns for your fund have been lodged. If the status has not been amended after 21 days, you’re or the fund’s administrator should contact the ATO to see what is going on.

Whether the consequences of the ATO clamping down on the lodgement of SMSF annual returns is unintended remains to be seen. Still, the impact on your SMSF could be that the fund is left stranded until the outstanding returns have been in lodged and the ATO has updated the Super Fund Lookup. So, don’t get caught out.

Subscribe below to SMSF News to receive my latest articles

Graeme Colley, Executive Manager, SMSF technical and private wealth- Super Concepts
  • Opinion
  • Research
  • Risk Management
  • SMSF News
  • Self Managed Super Funds (SMSF)
  • Tax
Share this article

Subscribe to our Insights

Here's what we found for you

Here's what we found for you

Here's what we found for you

Here's what we found for you

Our Privacy Policy explains how we handle personal information and use cookies and website tracking. We will follow the cookie and tracking settings you have selected in your browser.

Important notes

While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455)  (AMP Capital) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.

 

This article is not intended for distribution or use in any jurisdiction where it would be contrary to applicable laws, regulations or directives and does not constitute a recommendation, offer, solicitation or invitation to invest.

Cookies & Tracking on our website.  We use basic cookies to help remember selections you make on the website and to make the site work. We also use non-essential cookies, website tracking as well as analytics - so we can amongst other things, show which of our products and services may be relevant for you, and tailor marketing (if you have agreed to this). More details about our use of cookies and website analytics can be found here
You can turn off cookie collection and/or website tracking by updating your cookies & tracking preferences in your browser settings.