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  • ATO action to reduce the gap

    The concessionary tax environment for small super funds means that the tax consequence of non-compliance due to errors or deliberate acts, is less than in other populations.

    Yet we still focus on ensuring super funds pay the right amount of tax. To achieve this, we have adopted a multi-faceted approach, which includes:

    • providing tools and resources to assist funds to meet their obligations
    • mitigating risk with a rigorous and systematic approach to identifying and responding to regulatory risk
    • actively engaging with and seeking feedback from stakeholders in the small super fund environment.

    Super fund life cycle

    Our approach to managing the small super fund tax gap recognises key activities that occur during the three inherent phases of a fund's life cycle:

    1. establishment phase – initial setup and investment activities
    2. accumulation phase – wealth building activities
    3. retirement phase – starting an income stream during retirement.

    We undertake targeted communication and education strategies to ensure trustees, advisers and industry professionals are aware of their obligations and understand our compliance stance during each of these phases.

    We use a number of strategies to identify both potential and actual non-compliance. The first line of defence is our secure front-door process where each new application is assessed. This is to ensure individuals establish their small super fund for the sole purpose of providing them with retirement benefits.

    We check that only individuals with a genuine intent of establishing and maintaining a compliant super fund enter the system. In this way, we seek to prevent the tax gap arising from illegal early release and promoter activity.

    During the life of the fund, we make use of intelligence gathered from the annual audit process undertaken by SMSF approved auditors. Where non-compliance is reported, we apply tailored correctional action according to the severity of the issue.

    We also have specific strategies looking at compliance risks of high value funds, non-lodging funds and those looking to inappropriately access the concessionally taxed environment through profit-shifting arrangements.

    The risk strategies we adopt to minimise the tax gap are reviewed and validated twice a year to reflect the changing nature of compliance risk. Our areas of focus include:

    • reviewing and validating the competency of the work completed by some of our highest volume approved auditors
    • reviewing our highest value funds to ensure that inappropriate wealth accumulation strategies haven't been used to inflate investment returns within the concessional taxed environment
    • prosecuting promoters of illegal early release schemes who target vulnerable trustees
    • taking action to ensure that trustees of funds who haven't lodged bring their lodgments up to date, or to cancel their registration and cease operating as a small super fund
    • applying differentiated treatment to encourage self-correction of identified non-compliance including where the non-compliance was notified through the early engagement voluntary discloser service. Treatments include
      • enforceable undertakings
      • direction to educate
      • direction to rectify
      • administrative penalties
      • notice of non-compliance
      • disqualification of individuals
      • civil or criminal prosecution.

    Table 2 shows the population of self-managed super funds that lodge, compared to those that are registered, over the period 2012–13 to 2017–18.

    Table 2: Population of self-managed super funds that are registered and lodge (thousands), 2013–14 to 2017–18







    Registered funds






    Funds that lodge












    This data is displayed in Figure 2. It shows a trend in fewer registered funds lodging an annual return.

    Figure 2: Population of self-managed super funds that are lodged and registered, 2013–14 to 2017–18

    Figure 2: Graph showing the population of small super funds that are registered, and funds that lodge returns as outlined in Table 2.

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      Last modified: 19 Oct 2020QC 56336