• SMSF early engagement and voluntary disclosure service – April 2016

    This webinar covers:

    • the importance and benefits of early engagement
    • how to apply for the early engagement and voluntary disclosure service
    • practical examples of how the service may apply.
     

    See also:

    Your questions answered

    The following questions were commonly asked during the SMSF early engagement and voluntary disclosure webinars we ran in April 2016.

    Should I make a voluntary disclosure of a rectified contravention for my fund?

    The SMSF early engagement and voluntary disclosure service will be available to SMSF trustees and professionals who wish to engage early with us in relation to unrectified regulatory contraventions. If your fund had a contravention which has been rectified, the contravention should be dealt with by your SMSF auditor. If it is a reportable contravention, your auditor will report the rectified contravention to us via an auditor/actuary contravention report (ACR). We issue education letters for the majority of ACRs lodged.

    Can the SMSF early engagement and voluntary disclosure service be utilised for SMSFs with unrectified breaches in previous financial years and not just the current financial year?

    The SMSF early engagement and voluntary disclosure service can be utilised for SMSFs with unrectified breaches in current and/or previous financial years. However, the service cannot be utilised for an SMSF that is subject to a current ATO audit or review or has received notification of a proposed ATO audit or review.

    How does the SMSF early engagement and voluntary disclosure service differ from lodging an ACR?

    The SMSF early engagement and voluntary disclosure service provides a single entry point for SMSF trustees and professionals who wish to engage early with us in relation to SMSFs with unrectified contraventions.

    To be eligible for the service, the SMSF must not be subject to a current ATO audit or review or have received notification of a proposed ATO audit or review. It is expected that trustees will have engaged an SMSF auditor and / or other SMSF professional to devise a plan to rectify the contravention prior to utilising the service. The proposed plan to rectify the contravention and supporting documentation should be submitted with the SMSF regulatory contravention disclosure form.

    Information should also be provided that demonstrates that measures have been put in place to mitigate against similar breaches occurring in the future. In addition, any outstanding SMSF annual return lodgments must be brought up to date, any necessary amendments to SMSF annual returns and/or individual members’ income tax returns as a result of rectification of the disclosed breach must be made and any resulting income tax liabilities must be paid.

    When a voluntary disclosure of an unrectified breach is received by us, it is risk assessed and depending on the facts and circumstances of each case, will generally result in an ATO review. The review will enable us to work with the SMSF trustees or professionals with the view to accepting the undertaking or rectification proposal.

    With the ACR process, auditors must lodge an ACR within 28 days of completing an audit if, during the course of conducting the audit, they form the opinion that a reportable contravention may have occurred, is occurring or may occur.

    When an ACR is received by us, we complete a risk assessment to determine the appropriate action. The majority of ACRs received by us result in the fund receiving an education letter. However, for funds assessed as high risk, we commence an ATO audit.

    We will not commence an audit based on an ACR if the issue has been resolved via the SMSF early engagement and voluntary disclosure service, unless additional information that warrants further investigation becomes available.

    What kinds of breaches do you expect to be disclosed via this service?

    This SMSF early engagement and voluntary disclosure service is available for SMSFs with unrectified breaches. It is envisaged that this service will primarily be used for SMSFs with unrectified breaches of a serious nature, which would be likely to be subject to an ATO audit as a result of an ACR being lodged.

    Does this mean I don’t need to get my fund audited by my auditor if I have already voluntarily disclosed the issue?

    No, you must still appoint an SMSF auditor to audit your fund even if you have made a voluntary disclosure of an unrectified regulatory contravention.

    You must appoint an auditor to audit your fund each year, at least 45 days before you lodge your SMSF annual return. The auditor will examine your fund’s financial statements and assess your fund’s compliance with the super law. Your auditor should advise you of any breaches.

    The auditor must also advise us by lodging an ACR within 28 days of completing the audit if, during the course of conducting an audit, they form the opinion that a reportable contravention may have occurred, is occurring or may occur.

    As an approved auditor, if I am unsure of whether a client has breached SISA and SISR, should I utilise the SMSF early engagement and voluntary disclosure service?

    You should utilise our SMSF auditors’ professional-to-professional support service (which we refer to as P2P) to seek confirmation as to whether a regulatory breach has occurred and how the breach might be rectified.

    The Professional-to-Professional support service provides technical assistance to SMSF auditors. You can request general advice on the SISA and SISR requirements or SMSF administrative issues. The service provides you with direct access to our senior technical officers who provide timely advice to your query. You can access our P2P service by completing the Request for approved SMSF auditors’ profession-to-professional technical guidance (PDF, 995kB)This link will download a file form.

    The SMSF early engagement and voluntary disclosure service should only be used when it is clear that there has been a breach.

    If I require specific advice on how SISA and SISR will apply to certain circumstances, should I utilise this service?

    No, to obtain SMSF specific advice on how SISA and SISR will apply to certain circumstances, SMSF trustees and their agents can complete the Request for self-managed superannuation specific advice form.

    What are the possible consequences to the trustees of voluntary disclosures - can the ATO conduct an Audit?

    When a voluntary disclosure of an unrectified breach is received by us, it will be risk assessed and depending on the facts and circumstances of each case, will generally result in an ATO review. The review will enable us to work with the SMSF trustees or professionals with the view to accepting the undertaking or rectification proposal.

    However, in certain circumstances it may be necessary to escalate the review to an audit. For instance:

    • the trustee or professional is not actively engaged throughout the resolution process
    • we are unable to accept the proposed undertaking to rectify the breach
    • where given the facts and circumstances of the case, a more serious compliance enforcement outcome such as disqualification of trustees or the issue of a Notice of non-compliance is considered appropriate.

    If the SMSF early engagement and voluntary disclosure service is used in relation to an unrectified breach and the ATO accepts the undertaking to rectify the breach, will any administrative penalties imposed be remitted?

    If you utilise the SMSF early engagement and voluntary disclosure service and we accept the undertaking to rectify the breach, there will be increased scope for remission of any SISA administrative penalties imposed. However, it will depend on the facts and circumstances of each case. The voluntary disclosure, the compliance history and your willingness to actively engage with us throughout the review process will be taken into account when making the decision of whether to remit any SISA administrative penalties imposed.

    When does this process apply from?

    The service will commence during May. We will notify webinar participants via email of the commencement date for the service and when the form is available on our website.

    Do I have to wait for my auditor to lodge an ACR before I voluntarily disclose the unrectified breach?

    No, you can make a voluntary disclosure when you become aware of a breach, provided that you have engaged an SMSF auditor and / or other SMSF professional and have a proposed plan or undertaking to rectify the breach. You will need to complete the SMSF regulatory contravention disclosure form and lodge with the rectification proposal and supporting documentation.

    As a Tax agent, if I complete the SMSF regulatory contravention disclosure form electronically and then print, sign and scan it, can it be lodged via the Tax Agent Portal?

    Yes, you can submit the completed and scanned SMSF regulatory contravention disclosure form, the rectification proposal and the supporting documentation as attachments to a portal mail message. A maximum of six files can be attached which can be up to four megabytes each in size.

    When you log into the Tax Agent Portal and access the New Message page, you will need to choose ‘Superannuation’ as the topic and ‘Other’ as the subject.

      Last modified: 21 Jul 2016QC 49076