In recent years the ATO has introduced a policy, which removes the compliance status for self-managed funds that are more than 2 weeks late in lodging their annual returns.

While it is a legislative requirement for a super fund to meet all its reporting obligations on time, it isn’t one that has ever had any major consequences.  Usually just some late fees and some extra check ins from the tax office.

According to ATO research, late lodgement is strongly linked to more serious compliance issues in self-managed funds. So in response, the tax office is raising the stakes by removing compliance status from funds that fail to meet lodgement deadlines.

 

how does this impact SMSF members?

This creates added complications for SMSF members who are just genuinely a bit slack in meeting their reporting deadlines, as: 

 

1. Their employers won’t be able to make any contributions to their SMSF until the compliance status is reinstated.

Even after lodging the tax return it can take a little while for this to go through the process.  This can cause some cash flow issues for the SMSF especially if they have a Limited Recourse Borrowing arrangement or life insurance obligations to meet during this period.

 

2. This will also lead to unwanted “default” fund accounts for these members and potential complications for your employer.

Your employer is legally required to make Super guarantee payments before the due date. When the fund’s compliance status is removed, these payments will be rejected and the employer will either need to get another fund’s details to make the payment to or it will be made to the employer’s “default” fund.  Worse still, if the payment falls outside of the time limits the employer will have to ask for concessions to get a deduction for their super payment.

 

3. Your SMSF can’t accept rollovers.

While your fund’s status isn’t showing as complying on the super fund lookup records, you also won’t be able to roll any money across from another super fund.

 

4. Your fund may be restricted from making investments.

With increased checks being done by investment providers on entities including super funds, you may find that you won’t be able to change platforms or make new investments while your fund doesn’t have a clear compliance record on the SMSF Lookup site.  This can result in missed opportunities and a reduction of earnings within your fund.

 

what should you do?

So while the message is simple from the ATO – “Meet your reporting deadlines”, 2 weeks isn’t a very long time and life can get in the way.

However harsh these rules may seem, the ramifications it can have for your employer [which is usually a related business for SMSF members] and the complications it can have just aren’t worth it.  So if for any reason you think you aren’t going to meet your SMSF reporting deadlines, reach out to your SMSF advisor, request an extension and work with them to do whatever it takes to make it happen.

 

we’re here to help!

If you have any questions or concerns, our  SMSF Specialists are here to assist:

 

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disclaimer

Information provided in this blog and on this website is general in nature and does not constitute financial advice. Every effort has been made to ensure that the information is accurate, but information may become outdated as legislation and new government announcements are made. Individuals should not rely on this information to make a financial investment decision as it does not take into account their personal circumstance. Before making any decisions, we recommend you consult a licensed advisor to take into account your particular financial situations and needs. 

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