ATO plays hard with late lodging SMSFs

From

Michael Hallinan

It seems that the ATO will change the status of SMSFs which fail to lodge their SMSF annual returns by the due date (subject to a 2-week grace period) from “complying” to “regulation details removed”.  This will effectively be social exclusion for those SMSFs.

Whilst this change does not alter the complying fund status of an affected SMSF – only the issue of a notice of non-compliance (or the revocation of a previously issued notice of compliance) will alter the compliance status of an SMSF. It will mean that rollovers to the SMSF will not occur and unrelated employer contributions will not be made as the SMSF will not appear from the Super Fund Lookup website to be above board (or kosher).

SMSF trustees will have to ensure that their annual returns are lodged on time (or, at worst, within the two-week grace period) in order to avoid this social death.

SMSFs which have been subject to this action have no effective legal redress.  Inclusion of the SMSF’s details in the Super Fund Lookup website is not a statutory right of the SMSF or trustees and as the operation of the website is not mandated by legislation, there will be no rights of appeal to the Administrative Appeals Tribunal or right of review under the Administrative Decisions (Judicial Review) Act 1977.

A complaint to the Taxation Ombudsman (which is a service provided under the auspices of the Inspector-General of Taxation) may not be effective as there is no statutory right to be listed on the website and, in any event, the Ombudsman may view the delisting of late lodging SMSFs to be a reasonable and non-punitive means of ensuring SMSFs perform their statutory obligation to lodge returns by the due date.

If the SMSF has lodged its returns on time and the SMSF is delisted, in this case it may be a basis for an effective complaint to the Taxation Ombudsman.  If the SMSF has remedied its late lodgements by lodging the missing returns, the non-rehabilitation of the SMSF may also be a basis for an effective complaint to the Taxation Ombudsman.

What to do?

Ensure that annual returns are lodged by the due date. It would be better not to rely on the two-week grace period.  Generally, for SMSFs which have not appointed a tax agent the due date for lodgement for the financial year ended 30 June 2019 is 31 October 2019.

If the 31 October 2019 deadline cannot be met, then the SMSF should consider appointing a tax agent (before 31 October 2019) so that the lodgement of the return will be determined by the agent’s lodgement schedule.  Generally, this means returns for the year ended 30 June 2019 will be required to be lodged by 28 February 2020 (if the SMSF was established during the year ended 30 June 2019) or by 31 March 2020 (if the fund’s total income is $2m or more) or by 15 May 2020 (if the fund’s total income is less than $2m).  Different due dates may apply depending on the particular circumstances of the SMSF.

If a tax agent has not been appointed and the 31 October 2019 deadline (even allowing for the two-week grace period) is not likely to be satisfied then the SMSF should contact the ATO and advise the likely lodgement date and provide the reasons for the inability to meet the due date.

By Michael Hallinan, Special Counsel Superannuation

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