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  • An update from the regulator on practical issues within SMSFs

    Presentation to the SMSF Association National Conference 2020

    20 February 2020, Gold Coast Convention and Exhibition Centre

    Concurrent session 4C

    Dana Fleming, Assistant Commissioner, SMSF Segment

    (Check against delivery)

    I would like to start by respectfully acknowledging the Yugambeh People, the traditional owners of the land on which we meet, and pay my respects to their elders past, present and emerging, and all Aboriginal and Torres Strait Islander Peoples here today.

    My name is Dana Fleming and I am the Assistant Commissioner who leads the self-managed super funds area of the ATO.

    Thank you for having me along today to talk about what we have been focused on as regulator of the SMSF sector over the past 12 months and into the future. We value the importance of participating at the SMSF Association’s 2020 National Conference and the strong support organisations such as the SMSFA provides to us in our role as regulator and tax administrator of SMSFs.

    Last October was an important milestone for the ATO, celebrating our 20-year anniversary as regulator of the SMSF sector. Over these past 20 years, the sector has grown considerably with 1.1 million Australians now using an SMSF as a retirement savings option, with an estimated total value of assets held by SMSFs equalling almost $748 billion. This represents just over a quarter of Australia’s $2.7 trillion superannuation sector, making total assets held in SMSFs, more than those in either industry ($719 billion) or retail ($626 billion) funds.

    Accordingly, we take our role very seriously as one of the three regulators, with APRA and ASIC, responsible for the health of Australia’s financial system.

    The success of the SMSF sector comes from working in partnership with all our stakeholders. We trust that the mutual support and collaboration we have enjoyed to date with you all will continue for the next 20 years. We want to be recognised as a key contributor to people being confident in their ability to manage and monitor their retirement savings.


    This month marks one year since the conclusion of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission). There is no doubt the impact of the Royal Commission into the financial sector will play out over many years as its recommendations are implemented.

    I would like start by reiterating what I said at this time last year – the Royal Commission has in no way impacted our overarching regulatory stance. Rather, it has simply prompted a fresh look at how we can be a more effective regulator.

    In this context, today I want to discuss the ATO’s response to the Royal Commission, and how it’s informed our approach as the SMSF regulator over the past 12 months and into the future.

    To set the scene, I am going to firstly discuss how we approach our enforcement role and how we respond to particular types of breaches of the law in different ways.

    I then would like to share with you our key findings of the review we undertook in November 2018 of our enforcement approach over the three-year period to 30 June 2018, in response to the Royal Commission, and the actions we have subsequently taken and changes we have implemented.

    The findings of the review have reshaped the two key aspects of our role as regulator – both our enforcement approach over the past 12 months and into the future and how we support SMSF trustees and the sector through our tools and guidance material.

    To protect the super community’s confidence in the ATO as the regulator of SMSFs, we are mindful we must provide a considered and balanced response when we become aware an SMSF trustee has contravened their regulatory obligations.

    Our role as regulator

    To understand our approach to enforcement in the SMSF sector it’s important to understand our strategic direction and vision.

    The ATO program of work aims to create a future where superannuation is seen, valued and owned. We want to promote trust and confidence and encourage willing participation in the super system.

    As the regulator, our priorities are to ensure:

    • SMSF trustees are informed, confident and capable
    • the super savings of SMSF members are protected
    • approved SMSF auditors conduct adequate and proper annual regulatory SMSF audits.

    These priorities reflect the two elements of the ATO’s role as the SMSF regulator in protecting the integrity of the sector – enforcement and support.

    So, this captures what we want to achieve, which leads me to how we want to achieve these priorities.

    We work with SMSF trustees, industry and co-regulators to provide tools, services and assistance to trustees and their advisers to enable them to govern, appropriately manage and protect their retirement savings, while taking appropriate action to identify and address compliance issues.

    Our current SMSF enforcement approach

    Before discussing the findings of our November 2018 review, I first want to set the scene by providing some context and history about how we deal with non-compliant trustees – our enforcement approach.

    As part of our toolkit, there are a number of enforcement powers available to assist us in regulating and addressing non-compliance. Before 1 July 2014, the only enforcement powers available to us to address non-compliance behaviour were:

    • accepting an enforceable undertaking in relation to a contravention
    • applying to a court for civil penalties to be imposed; a person may also face criminal penalties for more serious breaches of the law
    • disqualifying a trustee of an SMSF
    • making an SMSF non-complying for tax purposes.

    With the exception of enforceable undertakings, these powers were blunt tools to deal with non-compliance and generally were only used in cases of significant non-compliance.

    The absence of any graduated enforcement action meant some funds completely avoided sanctions for regulatory breaches that were not severe yet not trivial either. Additional enforcement powers proportional to the conduct were deemed necessary in order to encourage greater levels of voluntary compliance and send a message to the community that there may be consequences if contraventions occur, even if subsequently rectified.

    As part of the Stronger Super reform process, we sought and were granted a range of additional powers in 2014, providing us with a broader spectrum of potential enforcement action. This has allowed us to apply a graduated compliance response that’s relative to the particular contraventions and circumstances of the SMSF and trustee.

    From 1 July 2014, the additional powers granted included:

    • education directions
    • rectification directions
    • administrative penalties under section 166 of the Superannuation Industry (Supervision) Act 1993 (SIS Act).

    Under this enforcement approach, the action we take depends on the nature, severity and frequency of the breaches and an assessment of the trustee’s attitude to fulfilling their regulatory obligations.

    Two pathway enforcement action

    In looking at our use of enforcement powers, it’s useful to distinguish between ‘removal’ enforcement actions (disqualification, non-complying, civil or criminal penalties) intended to remove trustees and their SMSFs from the concessionally taxed environment; and ‘remedial enforcement’ actions (directions, enforceable undertakings and administrative penalties) which are intended to foster trustee re-engagement and ongoing compliance. Income tax implications and sanctions may also be relevant, depending on the behaviour observed.

    There are essentially two pathways:

    • remediate and allow trustees to stay in the system, or
    • remove trustees from the system.

    Remedial pathway

    Enforcement actions in play when the remedial pathway is pursued are:

    • direction to educate
    • directions to rectify
    • enforceable undertakings

    Removal pathway

    Enforcement actions in play when the removal pathway is pursued are:

    • trustee disqualification
    • issuing a notice of non-compliance
    • wind-up of the SMSF (at the trustees’ request).

    Amendment of returns and imposition of both SISA and Tax Administration Act 1953 (TAA) administrative penalties may be considered and imposed under both pathways depending on the behaviour we are trying to address.

    Our preference is always to assist SMSF trustees to stay in the system by helping them rectify and return the SMSF to a point where it is again complying with the SIS Act. However, when rectification is not possible or appropriate, we will take action to remove the SMSF from the system and/or disqualify the trustee/s.

    The most serious action we can take in response to a breach is to disqualify the trustee. We will disqualify a trustee if the Commissioner is concerned that allowing them to remain a trustee would present a future compliance risk or risk to retirement savings.

    It’s one of the ways we protect the integrity of the SMSF sector. We will only disqualify a trustee after we have considered all other enforcement actions. It’s not a decision we take lightly.

    SMSF regulatory contraventions

    Our data tells us that, on average, over the past five years, only two per cent of lodging SMSFs are reported as contravening regulatory provisions of the SIS ACT. This is terrific, because it means the vast majority of SMSFs are doing the right thing.

    We become aware of this population through receipt of:

    • auditor contravention reports (ACRs)
    • outcomes from our risk treatment strategies
    • voluntary disclosures by SMSF trustees or their tax agents
    • third-party referrals from a range of internal or external sources.

    The good news is that nearly 50 per cent of SMSFs who are advised they have contravened a regulatory provision, self-rectify before lodging their return.

    However, when trustees operate an SMSF with unrectified regulatory contraventions they are placing their SMSF’s assets at risk. This has the potential to place an unnecessary burden on the community if the SMSF loses its retirement savings. Whilst two per cent isn’t a large number of SMSFs, in the context of a $750 billion sector the amount of super savings at risk is not insignificant.

    On average, the most common contraventions involve:

    • loans 21.1%
    • in-house assets 18.5%
    • separation of assets 12.7%.

    In the 2018 financial year, we received ACRs that reported 16,909 regulatory contraventions by 8,215 SMSFs. In the 2019 financial year, we received ACRs reporting 27,719 contraventions by 10,330 SMSFs.

    When we investigate contraventions, we take into consideration the trustee’s attitude to their regulatory obligations and their willingness and ability to operate a complying SMSF. Based on what we find, there are two pathways for trustees. For the majority, we aim to help them get back on track. Our actions include education and helping them implement a plan to fix any unrectified contraventions. For some trustees though, the best strategy, once outstanding contraventions are rectified, is to assist them to swiftly exit the system. 

    I want to emphasise, when we contact trustees the vast majority work with us to self-rectify. In fact, nearly all do. Only in the most serious cases do we need to take pro-active enforcement action.

    • In some cases rectification actions are inappropriate. For example:
    • the contravention can’t be rectified
    • the trustee behaves in a manner that reflects a blatant disregard for the law
    • the trustee seeks to misuse their SMSF to take advantage of the generous low super tax rates.

    In these cases we’ll take our firmest action to disqualify the trustee and/or make the fund non-complying.

    In the 2018 financial year, we disqualified 257 trustees (representing 169 SMSFs) and made 11 funds non-complying. In the 2019 financial year we disqualified 145 trustees, representing 103 funds, and made 26 funds non-complying.

    In the 2019 financial year, excluding directions to educate, of the nearly 27,719 contraventions reported for 10,330 SMSFs, we only needed to take proactive enforcement action (that is, disqualify a trustee, make a fund non-complying, impose administrative penalties, enforceable undertakings and issue directions to rectify) for fewer than 500 SMSFs, less than five per cent. The remainder of SMSFs worked with us to voluntarily get back on track.

    SMSF trustee risk strategies and treatments

    These outcomes are the result of our seven ongoing programs of work focused on our key risk areas; I have covered these extensively in previous speeches, so I won’t discuss them in detail today. To summarise, our program of work incorporates key risk focus areas; we are half way through the three-year program. The key current compliance focus areas are:

    • regulatory contraventions
    • illegal early release and promoters
    • non-lodgment of the SMSF annual return
    • top 100 SMSFs program
    • top 100 auditors program
    • high-risk auditors program
    • SAN misuse.

    I have already discussed our regulatory contravention program of work but some brief highlights in relation to the other programs are:

    • illegal early release and promoters: this year we successfully prosecuted our first promoter case under the SIS Act, they were fined $220,000 for illegally promoting illegal early access of super. We hope this sends a strong message to similar promoters that this behaviour won’t be tolerated
    • non-lodgment of the SMSF annual return: this continues to be an area of concern for us with about 24,000 SMSFs never lodging a return. We estimate this represents about $1 billion of retirement savings at risk.
    • The lapsed lodger population is about 54,000 SMSFs. These are SMSFs who have been lodging returns and have then stopped for some reason.  Based on their last return lodged this represents about $19.5 billion of assets at risk. If we include returns not lodged on time for the 2019 financial year for the lapsed lodger population, this increases to 63,000 lapsed lodgers and about $30 billion of retirement savings at risk.

    Lodgment is the only way we have visibility as to whether SMSFs’ retirement savings are being appropriately managed. This means nearly 90,000 SMSF are not meeting their most basic obligation of lodging their annual return.

    I am particularly concerned by the never-lodger group as this behaviour is highly correlated to illegal early release. We can see where there has been a drop in the individual’s APRA fund balance and then the SMSF fails to lodge its first return. Intuitively, they are hardly likely to lodge their return to tell us they took the money out and spent it.

    In both these populations, I can’t say the money isn’t there, I can say it’s at risk.

    • top 100 SMSFs program: we continue our work with this group and have a couple of cases underway. The top 100 SMSFs currently represent about $8.3 billion of assets and the entry point is over $40 million
    • top 100 auditors program: we should finish this by 30 June 2020; to date we have referred six of the top 100 to ASIC
    • high-risk auditors program: this is a rolling program; for the 2020 financial year so far, we have referred 14 auditors to ASIC
    • SMSF Approved Auditor Number (SAN) misuse: we started this program in 2017 by mailing SMSF auditors a list of all annual returns which listed their approved auditor number as evidence they had performed the audit. The auditors then checked this list against their client records. In 2017, 1,685 cases of SAN misuse were reported to us, linked to 626 tax agents. In 2018 this dropped to 761 cases linked to 208 tax agents. We have thus far referred two tax agents for criminal prosecution where their behaviours involved forging financial accounts and signatures and taking money fraudulently for audits that hadn’t been performed.

    Royal Commission

    Having set the scene and provided context and history to our enforcement approach, I would like now to pause and reflect on the impact the Royal Commission has had on our enforcement approach.

    After the Royal Commission, the expectations of regulators definitely increased and certainly, the focus on being a more effective and efficient regulator has never been more critical. It highlighted the change in community expectations around what regulators are doing and more importantly, what they should be doing.

    In the context of the Royal Commission, both ASIC and APRA reviewed their enforcement approaches. In both cases, the reviews supported the need to shift to a stronger enforcement stance to improve regulatory effectiveness by strengthening and intensifying their approach to enforcement and expanding their responsibilities to stamp out misconduct in the financial sector, with APRA shifting to a ’constructively tough’ approach and ASIC to a ’why not litigate’ mindset. Both ASIC and APRA restructured to bring greater focus to the enforcement aspect of their roles.

    ATO review of enforcement approach

    Whilst the ATO was not part of the Royal Commission, as a regulator of the financial system, it was our responsibility to consider our response. We did not consider it necessary to restructure our operations as we already had a clear structure and dedicated workforces focused on strategy and support and enforcement. However, we did review our enforcement actions in the context of assessing our regulatory effectiveness. This was also timely, given we have had ‘new’ enforcement powers for four years.

    As I stated at the outset, this was merely a review of how we could improve our approach, not a shift in emphasis to dial up our enforcement activity.

    Our key findings were:

    Use of our regulatory powers

    • although when applied, we used our powers to disqualify a trustee and make a fund non-complying appropriately, we needed to improve our process for monitoring post-enforcement action compliance
    • a lack of consistency in applying our full range of enforcement powers
    • over the three years to 30 June 2018, 75 per cent of administrative penalties were fully remitted.

    Effectiveness of the use of these powers

    In relation to trustees on the remedial pathway, the most concerning finding of the review was that (other than for enforceable undertakings) after enforcement action was taken, for a significant proportion of SMSFs their subsequent compliance behaviour (measured in terms of meeting lodgment obligations) was significantly below the level of the general SMSF population – indicating regulatory action in these cases was ineffective:

    • of the trustees who complied with an education direction, more than a third had outstanding returns
    • of the trustees who complied with rectification directions nearly two thirds had outstanding lodgments
    • of the trustees who complied with an enforceable undertaking, 10 per cent had an outstanding lodgment
    • of the 75 per cent of trustees who had their administration penalty fully remitted, over one third continued to have outstanding lodgments.

    These findings indicated there was room for improvement, both in terms of our enforcement approach and providing better support and assistance to SMSF trustees, to ensure they are swimming between, rather than outside, the flags.

    Improving our regulatory effectiveness

    As a result of our review, we have taken a number of actions to improve our regulatory effectiveness and build trust and confidence in our actions as regulator by providing more clarity to the SMSF sector. The direct actions can be classified into three areas:

    • improving consistency in case outcomes and post-enforcement action processes
    • improving the effectiveness of our actions by recalibrating our enforcement approach
    • improving trust and confidence in the ATO as regulator by being more transparent in our enforcement approach and outcomes.

    Our target was to have completed all these actions by the end of this financial year; we are on track to achieve this.

    Improving consistency

    To promote better consistency in applying our powers, our first action was to articulate for case officers the ATO’s expected approach to considering the use our enforcement powers in conjunction with each other when dealing with a regulatory breach. This outlined the ‘remediate’ and ‘removal’ pathways in the context of all of our SMSF trustee programs of work; regulatory contraventions, illegal early release, non-lodgment and so on.

    This required us to first update and refresh our practice notes and statements that dealt with the use of each of our enforcement powers. In particular, this included recalibrating our approach for education directions and administrative penalties in response to the finding of poor post-enforcement compliance in significant parts of the contravening population.

    To support consistent case outcomes, in April 2019 we established a complex-case advisory panel to support and guide case officers when applying our enforcement powers; in particular, administrative penalties and the more serious sanctions. We also implemented a process for following up the exit pathway actions of disqualification of a trustee and making a fund non-complying to check on post-enforcement action compliance.

    Improving effectiveness

    So what changed in these updates and the refresh of our enforcement approach? To address poor post-enforcement action compliance, we prioritised recalibrating our approach for education directions and administrative penalties by updating these practice notes for case officers immediately.

    Firstly, we set an expectation of greater utilisation of directions to educate. In all cases where a regulatory breach has occurred, if the trustees are on the ‘remediate’ pathway an education direction should be considered to improve post-breach compliance, in conjunction with any other actions deemed appropriate.

    Secondly, where trustees are on the ‘remediate’ pathway, we recalibrated our approach to remission of administrative penalties, given our previous approach of full remission wasn’t working effectively. Previously, the guidance set an expectation that full remission of the penalty could be considered if the breach was remedied. In effect, for the 75 per cent of breaches that attracted an administrative penalty, there were no consequences for not complying with the super laws. The updated practice note moves away from this approach, requiring the case officer to take into account broader considerations of what may be grounds for remission which likely will result in only partial rather than full remission. Trustees should now be aware that breaches of the law will attract a penalty.

    Improving transparency

    Lastly, we concluded it was critical to build trust and confidence in the ATO’s regulation of the SMSF sector by improving transparency in how we apply our enforcement powers and in setting our expectations of trustees so they can swim safely between the flags.

    To improve understanding of how we use our enforcement powers, we first committed to converting our remaining internal practice notes – dealing with directions to educate, rectification directions and administrative penalties – to public practice statements. Given the recalibration in our approach, our priority is the administrative penalty practice statement. We have undertaken targeted consultation and I expect to publish this by the end of March. This adds to the existing suite of law administration practice statements (PSLAs) for our pre-July 2014 enforcement powers of disqualification of trustees, issuing a notice of non-compliance to a fund and enforceable undertakings. These three PSLAs have already been updated and republished.

    Next, this year, we intend to publish the ATO‘s approach to using SIS Act enforcement powers which will articulate how we will use our enforcement powers in conjunction with each other when dealing with a regulatory breach on both the ‘remediate’ and ‘removal’ pathways.

    This will be followed by an annual ’Enforcement Report’ summarising the compliance actions we take annually; this will also include case studies to illustrate the context in which a particular action was taken, for example, disqualification of a trustee. This will assist trustees understanding upfront, through real life examples, of the potential consequences of non-compliance with the law. We anticipate the first report will be published by August, for the 2020 financial year.

    We have already published a searchable trustee disqualification register which provided greater visibility of this key enforcement action and enables professionals in the system to be confident that any new clients are eligible to be an SMSF trustee.

    In the theme of transparency, the following table shows the impact of our new approach on the use of our enforcement powers, which came into effect in the 2020 financial year.




    YTD 2019-20

    Direction to educate (trustees)




    Direction to rectify




    Enforceable undertakings




    Notice of non-compliance




    Disqualified trustees




    Disqualified trustees (funds)




    Number of SMSFs with penalties imposed




    Net admin penalties raised




    The table shows that year-to-date, 31 December 2019, the use of our education directions has already more than doubled compared with the full previous financial year and the amount of administrative penalties imposed over the six months is already more than the full previous financial year.

    Unsurprisingly, our pre-Stronger Super, more established enforcement actions (trustee disqualification, enforceable undertakings and issuing a notice of non-compliance) have remained relatively steady. Interestingly, the use of rectification directions is also more than double over the six-month period compared with the full previous financial year, despite no shift in focus. I think this is a positive side effect of articulating for our case officers an overarching enforcement approach; it’s made them more confident in their decision making when considering what actions to take.

    Support and guidance going forward

    The flow-on effect of our commitment to improving our transparency as a regulator is that we need to better explain our expectations of trustees – we want to continue to highlight better the ‘swim between the flags’ zone, where the ‘rips’ are and how you can better navigate the ‘sea’ of compliance obligations.

    Accordingly, we have undertaken a number of proactive communication strategies and started a number of projects to better inform and assist SMSF trustees.

    Investment strategy campaign

    Our investment strategy campaign is aimed at generating greater awareness of trustees’ obligations in relation to investment strategies among trustees and the SMSF industry in general. While receiving a mixed reaction (and with the benefit of hindsight, we could have executed the campaign better), I consider the investment strategy letter campaign a success when measured against this goal.

    Following on from our August 2019 mail out, this week we published further guidance on our website to help trustees comply with their investment strategy obligations.

    Online trustee education course

    In reviewing how we use education directions, it became clear we could better support trustees by having an ATO online education course that we could tailor to what trustees need to know at each lifecycle stage of an SMSF: setting up an SMSF, managing an SMSF and thinking about winding up an SMSF. Each module will have its own knowledge check to verify understanding of the relevant risks and issues of concern to us. We hope that easy access to a free course by the ATO will mean more trustees voluntarily undertake the course, rather than just in response to a breach.

    Informed trustees are less likely to contravene the provisions of the SIS Act, thereby saving them the costs associated with rectifying contraventions. This will also have the beneficial effect of improving compliance in the sector.

    The course will also satisfy the requirements of an ‘approved course’ required to be undertaken in response to an education direction and will give us immediate visibility of trustee compliance. We hope to have the course in place by the end of the calendar year.

    Auto-subscription to SMSF News for all SMSF members

    As the regulator of SMSFs, we are continually looking for better ways to support the sector, particularly through the guidance material we provide to both SMSF trustees and professionals to understand and meet their obligations.

    I hope you are aware of one of our key guidance materials - SMSF News. It’s not a technical product; it’s the key channel through which we communicate to the SMSF sector what it needs to know.

    It recently came to my attention that SMSF News has only 35,000 subscribers, which is very low considering the size of the SMSF sector. Unlike small businesses, which are automatically subscribed to the Small Business Newsroom, subscription to SMSF News is voluntary (which is possibly the reason for the low subscription rate).

    Accordingly, to increase the reach of the product, we are going to implement an automatic process for subscribing SMSF trustees to SMSF News. This would mean:

    Members of a newly registered SMSF will be automatically subscribed when their SMSF is registered.

    Members (not already subscribed) of existing SMSFs will be subscribed retrospectively.

    The ability to unsubscribe at any time will continue.

    So, watch this space. We plan to implement in waves, with our first priority being newly registered SMSFs from January 2020. Once we have road tested, we will extend the auto-subscription process to all our SMSF population for which we have contact details. We are starting the process this month, so a warm welcome to all our new subscribers.

    Regulator’s Bulletin

    In 2018 we released our first Regulator’s Bulletin. I am pleased to announce that we’ll be releasing another Regulator’s Bulletin this year.

    This bulletin will be on SMSF property development, outlining the areas where we see common mistakes and the potential tax and regulatory consequences of these mistakes.

    I am hoping the bulletin will be released mid-March. I would like to thank all those organisations that participated in the targeted consultation process and provided valuable feedback to make this issue of the bulletin as useful as possible to the sector.

    S.166 Administrative Penalty PSLA

    As already mentioned, our other key guidance product will be the release of the Section 166 Administrative Penalty Practice Statement which we also plan to publish this March.


    Lastly, I would like to finish by highlighting some important information in relation to the devastating bushfires our country has experienced and some of the ways we are assisting affected SMSFs and their members.

    As at January 2020, there were 75,013 SMSFs within a bushfire-affected postcode.

    If you have been impacted by bushfires, we don't want you to be concerned about your tax affairs. Now is the time to focus on you, your family and community. We'll help you sort out your tax affairs later.

    If you or your SMSF’s business or residential address is in one of the identified impacted postcodes, we have automatically applied deferrals for activity statements, annual return lodgments and associated payments to 28 May 2020. You (or your agent) don’t need to apply for this deferral.

    We can also provide you with other information and assistance relating to your tax affairs:

    • give you extra time to pay your debt or lodge tax forms such as activity statements
    • help you find your lost tax file number (TFN) by using methods to verify your identity such as date of birth, address and bank account details
    • re-issue income tax returns, activity statements and notices of assessment and help you reconstruct tax records that are lost or damaged
    • fast track any refunds owed
    • set up a payment plan tailored to your circumstances, including an interest-free period
    • remit penalties or interest charged during the time you’ve been affected.

    See our Bushfires 2019–20 page for more information, including details of impacted postcodes.

    If you have been affected by this disaster and need assistance, or have been affected but are not on the postcode list, call our Emergency Support Infoline on 1800 806 218.

    The lodgment deferral to 28 May 2020 flows through to the due date for SMSFs with an annual obligation to lodge their TBARs.

    However, I must highlight that if delayed lodgment results in a delay in us making a determination that your member has exceeded their transfer balance cap, the member will need to commute more from their retirement phase income stream to rectify the excess and will pay more excess transfer balance tax.

    I must also emphasise that the deferral does not extend to TBAR obligations if your member has exceeded their transfer balance cap and we have sent them an excess transfer balance determination or the fund a commutation authority.

    You must correct any reporting errors, omissions or a commutation the member has made in response to the determination no later than 10 business days after the end of the month for the due date of the determination.

    If you do not, we will send a commutation authority to the member’s fund - which may be their SMSF, but also may be their APRA fund.

    If we have sent the SMSF a commutation authority, within 60 days you must:

    • action the authority and report to us that you have done so, OR
    • correct any reporting errors or omissions that will allow us to revoke the authority.

    We have been contacting the small number of individuals and SMSFs who are in bushfire impacted postcodes to help those who’ve received a determination or commutation authority; the due date for responding is getting close.

    The contact is being made by our transfer balance cap team so we can ensure individuals and SMSFs understand their obligations, reporting errors can be expediently resolved and extensions of time to respond to a determination given where appropriate. Even if we extend the time to respond to the determination, delays in rectifying an excess will still result in the individual paying more excess transfer balance tax.

    The journey

    I would like to refer you, via the SMSFA conference paper (PDF, 431KB)This link will download a file link, to the timeline which captures our journey. Over the past 12 months, we have taken a number of actions to improve our consistency and transparency as a regulator. To recap, acting on the findings of our review, from an enforcement perspective we have rearticulated our overarching enforcement approach to our case officers for each of our key risk programs, supported by:

    • refreshed and republished PSLAs for pre Stronger Super powers:
      • PSLA 2006/18 - Enforceable undertakings
      • PSLA 2006/17 - Disqualification of Trustees
      • PSLA 2006/19 - Notice of non compliance  
    • updated internal practice notes for post Stronger Super powers (soon to be published as public PSLAs):
      • education and rectification directions
      • S.166 Administrative penalties
    • established a complex-case advisory panel
    • systemised post-enforcement action monitoring

    From a guidance and support perspective we have sought to improve trustees understanding of where the swim between the flags zone is by:

    • starting our auto-subscription to SMSF News
    • developing an on-line trustee education course
    • publishing investment strategy guidance
    • publishing our next Regulator's Bulletin on property development
    • publishing an enforcement actions report for the 2020 financial year

    I think this demonstrates how busy we have been over the past 12 months, in addition to our seven programs of work for our key risk areas. I would like to take this opportunity to thank my staff, many of whom are here today, for all their effort and hard work, without which these achievements wouldn’t have been possible. The journey of course doesn’t end and we are always looking for feedback on where we can improve next.


    I am proud of the achievements we have delivered over the past 12 months and would like to reiterate how important it is that we continue to work with the SMSF sector and organisations such as SMSFA to ensure the integrity of the sector so that trust and confidence in it remains strong.

    While our respective roles in the SMSF sector come from different perspectives, undoubtedly a common objective for us all is that we want SMSFs to continue to thrive and we want trust and confidence in the credibility of SMSFs as a retirement planning choice to remain strong.

    Managing one’s own super is a privilege and everyone involved in the SMSF sector should demonstrate the required care, skill and diligence expected of them, to ensure that individuals have adequate retirement savings to meet their retirement goals. Our side of the social compact is to provide the right support and guidance to trustees so they can swim safely between the flags.

    The ATO always welcomes the opportunity to participate in events like this. They promote a clearer understanding of issues that concern the SMSF industry and provide a platform for us to engage with you and to work with you to develop practical solutions that both protect individuals’ retirement savings and make complying with regulatory and income tax obligations easier.

    Thank you for coming along today.

    Last modified: 16 Mar 2020QC 61780