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  • Super funds

    The ATO is regulator of Australia's 597,000 self-managed super funds (SMSFs), which account for around $697 billion in assets or 30% of the $2.3 trillion in superannuation assets under active management.

    We also support some 250 APRA-regulated super funds, with 34.5 million member accounts receiving contributions and paying benefits.

    As a regulator of the superannuation industry, we continue to work in partnership with the industry to roll out government programs, including SuperStream and the new superannuation measures announced in the 2016–17 and 2017–18 Budgets.

    Indicators of participation

    Correctly registering in the system

    The ATO engages with, and risk assesses, all new SMSF registrants to ensure they are eligible and understand their role and obligations as trustees. We screen out people who do not meet the requirements. This gives us a level of confidence that the nearly 32,000 newly registered SMSFs in 2016–17 are both eligible and equipped to meet their obligations.

    In 2016–17, we enhanced the ATO Online service, accessed via myGov, to allow trustees of SMSFs with myGov access to update their SMSF registration details when needed.

    Lodging information on time

    For 2015–16 SMSF annual returns due during the 2016–17 year, 93% were on time; noting that all SMSFs were given an extension until 1 July 2017 to enable them to better prepare for the new superannuation measures implemented from that date.

    This year, we identified that 9% of SMSFs had failed to meet their regulatory and income tax lodgment obligations for both 2013–14 and 2014–15. Accordingly, we implemented a strategy of differentiated treatments and initial results have seen around 12% of funds taking action to wind up or bring their lodgments up to date. We continue to actively pursue the remaining funds to either bring them back to regulatory compliance or remove them from the system.

    During 2016–17, 99% of APRA–regulated funds lodged their 2015–16 income tax returns, with 97% lodging on time.

    APRA–regulated funds lodged 99% of 2015–16 Member Contribution Statements on time.

    Reporting complete and accurate information

    All SMSFs must be audited annually by independent registered SMSF auditors. The auditors are required to report material contraventions of financial and Superannuation Industry Supervision Act 1993 obligations to the ATO. This provides a high level of transparency on SMSF compliance, with 1.4% of funds reported for the 2014–15 year, down from 1.6% of funds reported for the previous year.

    APRA-regulated super funds generally demonstrate high levels of compliance, with around 99% fully compliant with their member reporting obligations to the ATO. Instances of non-compliance are typically inadvertent. The ATO continues to work with APRA-regulated super funds to improve the quality of reporting. This includes the provision of diagnostic reports to help them assess how well they are meeting their reporting obligations to the ATO. This also ensures timely and accurate payment of member benefits.

    Paying tax obligations on time

    In 2016–17, 79% of SMSF liabilities were paid on time, up 4 percentage points from last year, and 96% were paid within 90 days of the due date. This is up 2 percentage points from last year.

    At 30 June 2017, SMSFs owed $123.4 million in collectable tax debt, down 23% from last year.

    SMSFs accounted for less than 1% of total collectable debt.

    How we are making it easier

    Supporting SMSFs

    The ATO continues to work collaboratively with industry through key SMSF associations and representative bodies. In 2016–17, our primary focus has been on working closely with the sector in implementing the new superannuation measures and associated support and guidance products. We also entered into a three-year strategic partnership with the Self-Managed Superannuation Fund Association, with the aim of building and maintaining the sector’s professionalism and influencing the behaviour of SMSF trustees and professionals.

    Through this collaboration, we provide a full range of services to help SMSF trustees and their advisers understand and comply with their obligations, so they can effectively manage and protect their retirement investment.

    SMSFs can have no more than five members, all of whom must take on a trustee role with responsibility for their fund's day-to-day operation. This means that more than 1.1 million SMSF members must understand how to meet their fund's fiduciary, Superannuation Industry (Supervision) Act 1993 and tax obligations.

    In 2016–17, we worked with members of the SMSF sector to produce practical and tailored guidance on specific issues. This includes information that provides certainty to trustees about their responsibilities through each stage in the fund life cycle, from start-up, accumulation and retirement planning through to paying benefits and winding up.

    Our client experience satisfaction survey in 2017 found that SMSFs were significantly more satisfied with the ATO’s online services than with our non-digital services.

    Supporting APRA-regulated super funds

    In partnership with industry, we are undertaking a major redesign of APRA-regulated super funds reporting processes to shift from the current annual reporting to a more contemporary event-based regime. This reform will leverage SuperStream and will meet a growing need to provide members with more up-to-date account information.

    With the introduction of SuperStream, routine interactions between APRA-regulated funds, employers and the ATO are digital. SuperStream, as a digital standard, provides for more efficient and faster payment of contributions to member accounts. An assessment of the implementation of SuperStream undertaken during 2016–17 found that the benefits are now flowing, and will continue as the changes are embedded and the system matures. See SuperStream improves the experience for fund members, employers and super funds for more information.

    The ATO provides a range of online super services that support the operation of the superannuation industry and the integrity of the system. The ATO worked closely with APRA-regulated super funds to enhance SuperTick so that APRA-regulated super funds report, in real time, open and closed accounts to the ATO. This was previously an annual process rather than ‘event-based’. The enhanced SuperTick service has meant that super monies are paid to members’ accounts more efficiently and that unnecessary processing, for both the ATO and APRA-regulated super funds, has reduced.

    • We recognise the reliance the superannuation industry has on the services provided to meet their regulatory obligations. In December 2016, the ATO implemented an online Superannuation Dashboard to provide close to real-time information for fund users about the performance and availability of these services.
    • The system failures in December 2016 and February 2017 created challenges for the superannuation industry. In response, the ATO maintained communication and, with APRA’s assistance, we provided additional time for APRA-regulated super funds to meet their obligations. We improved our incident communication protocols and are working with industry to implement business continuity plans to ensure the resilience of the superannuation system.

    Delivering contemporary and tailored services

    Assuring compliance

    To ensure protection of retirement benefits, our primary focus in SMSF regulatory and income tax compliance is on prevention rather than correction. We aim to help SMSFs avoid contraventions in the first place or make voluntary disclosures, rather than penalise them afterwards.

    The new ‘one-stop shop’ voluntary disclosure service for SMSFs allows engagement with the ATO at the earliest possible stage. We have had around 260 voluntary disclosures in 2016–17, covering a range of compliance issues, many also incorporating non-lodgment of returns. In cases of one-off regulatory breaches, the voluntary disclosure service has facilitated early resolution without the need for further ATO intervention or sanction, and provided certainty for trustees.

    We undertake work to assure the compliance of SMSF auditors with reporting obligations and of their independence and competence. Our focus on low cost auditors in 2016–17 found that while low cost does not necessarily mean poor quality, a number of auditors needed further support and education, with several auditors referred to ASIC.

    In 2016–17, our assurance activities focused on both SMSF regulatory and income tax compliance:

    • Through the analysis of ATO-held data and outcomes from SMSF Auditors in their annual independent audits, we applied enforcement outcomes to over 1,250 SMSFs. These outcomes included directions, administrative penalties, trustee disqualifications and, in a small number of cases, issuing certificates of non-compliance.
    • Our review of income tax reporting for a sample of SMSFs confirmed there is a high level of accuracy in the reporting and calculation of income tax liabilities for SMSFs. Though minor discrepancies did exist, these did not give rise to concern.

    Through project ‘Super Scheme Smart’, we provided guidance around certain tax planning arrangements involving SMSFs, with specific messages targeted to individuals. As a result, we have seen some positive action taken by individuals to change behaviours and have progressed cases targeting dividend stripping resulting in the unwinding of several arrangements, and considerable income tax and penalties outcomes being applied.

    We continue to monitor the usage of Limited Recourse Borrowing Arrangements (LRBA) and whether these arrangements are made on an arm’s length basis. In 2015–16, around 7% of SMSFs had an LRBA in place, an increase from the 6.3% of funds reporting LRBAs in 2014–15. We have provided guidance to industry on our concerns regarding the usage of LRBAs and provided a safe harbour for SMSFs who have established a non-arm’s length LRBA to self-correct without penalty.

      Last modified: 30 Oct 2017QC 53661