Emma Rosenzweig, Deputy Commissioner, Superannuation and Employer Obligations
Speech delivered at the SMSFA National Conference on 21 April 2022
Thank you for your introduction. It’s my pleasure to be speaking here at the SMSFA Annual Conference for the first time as the ATO’s Deputy Commissioner for Superannuation and Employer Obligations, representing the Commissioner who is the regulator of the SMSF sector.
We take our responsibility as a regulator seriously. As the regulator of SMSF sector, our aim is to:
- make it easy for trustees and their trusted professionals to do the right thing, and hard not to
- be transparent with data about the sector
- recognise the importance of your roles – the advisers, auditors and tax agents who are key to providing support and advice to trustees on their journey
- respond to compliance concerns in a risk-based way
- ensure that both you and we (the ATO) are clear about what our role is, and just as important, what it is not.
For example, as the regulator, we are not responsible for developing the law, providing financial advice, compensating victims of scams or resolving disputes between trustees. This has been misunderstood by some participants in the sector.
I’ll talk to you today about each of these points, and I’ll also put my broader ATO hat on and talk to you about some tax and registry issues that are relevant to SMSFs.
Research
But to start off with, if we’re going to make it easy for you and trustees to do the right thing, and hard not to, it’s important that we ensure we keep our understanding of the market and their needs up to date.
To help us achieve this, late last year we commissioned an independent SMSF research study which involved:
- mystery shops with SMSF professionals
- in-depth qualitative interviews
- an online survey
- group discussions with potential and current SMSF trustees and professional advisors.
Whilst we won’t be publishing the findings in full, we are sharing relevant information with you through events like this, to broaden our mutual understanding of trustee behaviour in the sector.
The research showed there are distinct clusters of SMSF trustees that reflect a wide variation in trustee knowledge, confidence, and engagement.
Clusters:
- 21% confident investors
- 25% pragmatic managers
- 18% informed delegators
- 23% trusting delegators
- 13% unprepared trustees.
Clusters vary from one extreme to the other. There are those who are very confident and financially savvy, have an interest in investing and finance, and maintain and build on their knowledge through attending seminars and webinars.
Then at the other extreme, we have the unprepared trustees who lack the financial confidence and capability to manage their SMSF. They tend to be impulsive and ad hoc in their decision making, are price sensitive and reluctant to invest in professional advice. This group are also more likely to rely on ad hoc and informal information sources, such as social media and friends. Interestingly, one-third of those in the unprepared group advised they regretted their decision to start an SMSF.
Then there’s a group referred to as trusting delegators who do seek professional advice, but put their complete trust in someone else, which sometimes can be to their detriment. These trustees approach the running of their SMSF without doing any research of their own, delegating all decisions to someone else, and leaving themselves vulnerable and open to being a victim of a scam.
What the research really highlights is the important and significant role you play in helping trustees effectively run their SMSF and meet their regulatory obligations. While the ATO is seen as a trusted source of information, trustees are more likely to turn to their accountant or SMSF professional for information and advice.
While the majority of trustees managing their SMSF are doing the right thing and building their retirement savings, this independent research has found that over a third of trustees in the system either:
- lack the financial confidence and capability to manage their SMSF, or
- do not take responsibility for making their own decisions, putting their complete trust in their adviser without fully appreciating or understanding what’s going on.
For those who do not have the benefit of sound advice, this often results in non-compliance, puts their retirement savings at risk and can mean they’re a more challenging client to support.
Another finding of concern though, is that the majority of trustees also believe it’s OK to leave their compliance responsibility entirely to their SMSF professional.
I am certain you’re all aware that, while a trustee can appoint a professional to help them, the final responsibility and accountability lies with the trustee. Your positive influence on their compliance behaviour will result in a far better experience and outcome for your client.
An interesting revelation from the research is that trustees develop habits in the first 6 months of operating their fund. So, this is a huge opportunity to engage early with these individuals to get them forming good habits and on the right track to a running a well-managed compliant fund.
This is why it’s really important for all of us to ensure prospective trustees enter the system with their eyes wide open, with a good understanding of their responsibilities and obligations before signing up to an SMSF.
My advice is: ask some questions to try and determine the level of understanding that your clients have and don’t make assumptions about their knowledge.
Take this quote from one of the participants in our research:
My accountant talks to me and all I hear is blah, blah. I’d like to understand what they are saying but I am missing some basic facts, like what is a dividend?
Some of you may laugh but this sort of statement should shock you coming from someone who has chosen to take their retirement future into their own hands by running their own SMSF.
It certainly worries me as regulator and makes me question why they chose to start an SMSF. A client such as this is likely to have high expectations on advisers such as you – not understanding that ultimately, they are responsible for making decisions that impact their investment returns, compliance and administration obligations. This poses a greater risk to you, and to the superannuation system as a whole.
Before I move onto the next topic, my call to action based on the research findings is don’t make assumptions about your client’s financial literacy. It is always worth getting an understanding of their level of knowledge so you understand what they will need from you.
It is also important to ensure they understand that, as the trustee, they are personally responsible and accountable for the performance and actions of their SMSF. You should ensure there are clear expectations between you and your clients about what each of you are responsible for.
SMSF statistics
So, moving on from external research, most of you would know that each year we publish annual statistics which provides information on the overall health of the SMSF sector, including demographics, costs and asset allocations. These statistics are primarily based on SMSF annual returns, new registration data and auditor contravention reports lodged with us.
Our statistical report demonstrates SMSFs remain an important and integral part of Australia's super system. SMSFs represent just over a quarter of the $3.4 trillion Australian superannuation pool. There are:
- 600,000 SMSFs
- 1.1 million members
- $876 billion in assets.
They provide useful trend data and information about the performance of the sector as a whole which can help inform prospective trustees, industry professionals, policy makers and other key stakeholders to make decisions that impact the sector.
I do want to acknowledge there have been suggestions that our statistics underestimate investment returns. To clarify, our statistics are based on annual return information from all lodging funds (regardless of their size, age or asset mix) rather than using a sample based on exclusions criteria.
The investment performance data shouldn’t be used for individual comparative purposes other than annual comparisons of the SMSF sector as a whole. After all, it’s up to trustees to decide if the performance of their investment decisions are meeting their retirement goals and, if not, to review their investment strategies or look at other options.
Our regulatory stance
Now, as I stated, as the regulator our goal is to make it as easy for trustees and professionals to get things right, and hard not to.
This means a key part of our regulatory stance is ensuring the trustees and their advisors have good, factual information on which to make their decisions. They should understand that, when they choose to set up an SMSF, they are running a super fund themselves. With this comes a set of obligations, responsibilities and risks that they should be fully prepared to meet.
As regulator, it is not our role to tell an individual that they should or shouldn’t set up an SMSF, or how much money they need, how much they should be paying in fees, or what a good investment for their SMSF is. Yes there are rules around investing, but these go towards ensuring trustees meet their fiduciary responsibilities to both themselves and other trustees of the fund; it is not about the ATO as regulator having a prudential role.
However, as regulator, I think it is appropriate to tell trustees that they should be capable of knowing the numbers. They should be able to work out what level of fees they are paying and be able to compare those to other options to decide if they are comfortable with them.
They should also be able to work out the rate of return their SMSF achieves, to ensure that it’s in line with their investment plan and meeting their retirement goals, and that they are comfortable with how that compares to other options. Finally, they should be able to understand the level of risk they are carrying in each of their investments, and their portfolio overall.
Whether those numbers are good or bad is not for me to decide. But I wouldn’t be doing my job as a regulator if I didn’t tell trustees that they should know their numbers.
As professional advisors, you should also ensure that your clients know how to make these calculations so they can make good, informed decisions about the best options for them.
The research I talked about earlier shows that many trustees need good, clear information about these obligations and that there is a huge opportunity in the first 6 months to help them establish good habits. A product we’ve recently released – and we hope you will take advantage of this opportunity – is our publication Starting an SMSF (PDF, 1.62MB)This link will download a file. This is the first in a series of guides we will be delivering to support trustees throughout the lifecycle of their SMSF.
We also have a range of other support products on our website, such as videos, checklists, case studies and webinars. If you haven’t been to our booth yet, I encourage you to visit and say 'hi' to the team and grab of copy of the booklet to share with your clients as it’s another resource to complement the support you’re already providing them.
Responding to regulatory concerns
For the next part of the presentation, I will step you through those areas we are most concerned with and give you an insight into how we are addressing these risks.
In simple terms, we always maintain a strong focus on behaviours that inappropriately take advantage of the concessional tax environment or put retirement savings at risk, including fraud in the superannuation sector.
At a macro level, the system is operating very effectively, with over 97% of the SMSF lodging population not having had any reportable contraventions identified as part of their 2020 audit.
However, we are seeing increasing behaviours that concern us and the following are some of the areas where the system is not operating effectively.
Illegal early release
When we refer to illegal early release, we are talking about situations where individuals access their own super before a condition of release has been met. And unfortunately, this behaviour is on the rise. We see this play out in 3 main ways:
- new registrants who enter the system purely to illegally access their retirement savings
- existing trustees who stop lodging because they’ve accessed retirement savings illegally
- existing trustees who haven’t stopped lodging but have been illegally accessing some of their super under the guise of a loan.
We know that when an SMSF is established, a rollover from an APRA fund occurs and the first SMSF annual return is not lodged, there’s most likely been an illegal early release. This is either as a result of deliberate trustee behaviour or where the trustee is a victim of a scam or coercion.
Most concerningly, the number of SMSFs failing to lodge their first return has grown significantly, with this rate now sitting at 26% for the 2020 annual return. We are taking firmer action in cases where trustees don’t engage with us. We have already started our '3 strikes and you’re out' approach – where we provide trustees 3 opportunities to contact us and bring their outstanding obligations up to date before we move to disqualify them as a trustee.
In addition, you will also see us increasing the number of personal income tax returns we amend to assess them on the amounts they have illegally accessed.
To protect retirement savings, we take preventative measures by risk-assessing every individual entering the SMSF sector. We call this our new registrant program, as this assessment seeks to identify high-risk new entrants and refers them for further scrutiny to ensure they are not trying to enter the system for the wrong reasons. Since July 2020, these actions have protected over $317 million in retirement savings from leaving the super system illegally. This year alone has contributed $148 million to that figure and our busiest 3 months for registrations are still to come.
We also use this process combined with other sources of intelligence and data analysis to identify promoters of illegal early release schemes. We have found promoters can be either licensed or unlicensed and often target people who are in vulnerable communities, under financial pressure and with low financial and super literacy.
Some of the methods used to attract people include cold calling, social media, and face-to-face interactions at shopping centres, workplaces and community groups. Once they have convinced someone their scheme is legitimate, they support these individuals to establish an SMSF and withdraw their super before they are legally entitled to, and in most cases, in return for a high fee.
Let me make it clear, promoting illegal early access is unacceptable. Our scrutiny of those engaging in these behaviours will be intensive, and the sanctions will be severe, including loss of professional licences, significant penalties, and criminal prosecution.
In one such case, the ATO took legal action against a promoter who set up over 30 SMSFs to enable the trustees to illegally access their super. The Federal Court imposed a $220,000 penalty and a 7-year ban from setting up an SMSF, for this promoter.
Likewise, for trustees involved in these schemes, the bottom line is illegal early release is against the law and a matter we treat seriously, so don’t be tempted to go down this path. Those engaging in this behaviour can incur additional tax and penalties under the tax and super laws, and risk losing their retirement nest egg and their rights as a trustee to ever manage an SMSF in the future.
In a recent example of this, we got in contact with someone who had failed to lodge their SMSF and when asked if they had taken any money out of the fund for personal use, admitted they had used money to purchase a holiday home. This trustee has now been disqualified and will be receiving a significant tax bill as we will be amending their personal income tax return and applying penalties. Their future retirement savings have also been significantly diminished.
Identity fraud and investment scams
Another important feature of our new registrant program is the detection of identity fraud. This is a really important issue because identity fraud is becoming far more prevalent across Australia, and with nearly 3.5 trillion dollars in Australian superannuation, the SMSF sector is definitely not immune.
We’re seeing more and more instances of stolen identities being used to try and set up a new SMSF. Once a fraudster registers the SMSF they orchestrate rollovers from the victim’s APRA fund into the fund bank account controlled by them, and then steal the victim's retirement savings. And once it’s gone, it’s virtually impossible to get back.
In the 2021 financial year, we identified increasing numbers of individuals who were victims of identity fraud where SMSFs were registered without their knowledge or consent. Luckily, for most of these victims, we detected the fraud in time to protect their super. Unfortunately, however a small few did get through.
ASIC have issued alerts advising of current investment scams. The first involves scammers posing as financial advisors offering a super fund comparison service. These scammers use aggressive cold-calling tactics promising unusually high investment returns facilitated through a self-managed fund. Even I have received one of these calls.
To appear legitimate, they utilise company names, emails and fake websites that impersonate well-known Australian companies. Whilst the scammers properly established an SMSF, they create a separate SMSF bank account in the victim’s name but controlled by them. They then organise a rollover from the victims existing super fund, either with or without the knowledge of the individual, and once the money is in the account under their control, it’s lost forever.
A key strategy we have deployed to mitigate fraud and scams is to issue Alerts. When a new SMSF is set up or a member is added to an existing SMSF, the ATO sends an alert via a text message or email to the members of the SMSF. We also send an alert to members when changes are made to an existing SMSF’s bank account, electronic service address or authorised contacts. The alerts prompt the individual to get in touch with us if they are unaware of these changes so we can stop the fund registration or the change of details from proceeding.
This strategy has stopped a number of fraudulent activities from occurring so I can’t stress this point enough, if your clients receive an ATO SMSF alert and are not aware of any activity, get them to contact us straight away.
This is why it’s also vital to ensure your clients’ individual contact details – such as their mobile number and email address – are up to date with us, as this will ensure they always receive our alerts and are notified of any changes to their SMSF details.
While there is often discussion about whether ATO messages should go to clients or their advisers, in these situations the alerts will always go to the clients directly.
A key message to share with your clients is to be aware of who they provide their identity and superannuation details to, particularly where they are dealing with a third party only through online interactions. It is also important to remind your clients to check they’re dealing with a licenced financial adviser, which can be done on Moneysmart’s Financial Adviser Register.
If you are asked to register a SMSF for a new client or a new representative of an existing client, make sure you verify their identity as we have seen some tax agents unwittingly caught up in registering fraudulent funds. It is in no-one’s best interest, especially yours, if the SMSF sector develops a reputation as a mechanism being used to scam, defraud, or for illegal early release of super. That’s why it is important that we all do what we can to contribute to the integrity of the sector as a whole.
In short, strong client verification helps to protect tax practitioners, their clients, and Australia’s tax and superannuation systems from misuse and abuse from identity theft and related issues. We’ve recently published Strengthening client verification guidelines which provide more information on this topic.
Regulatory contraventions and Inappropriate tax planning arrangements
I will now cover what we’re seeing with regulatory contraventions.
Overall, we consider the sector displays positive regulatory compliance with over 97% of the lodging SMSF population having no reportable contraventions identified during their independent audit.
Whilst this is encouraging, for the 2021 financial year, we received Auditor Contravention Reports (or ACRs as we call them) for over 13,800 funds and, within those ACRs, over 40,000 contraventions were reported. This was an increase of nearly 10% over the last year.
So far for the 2022 financial year, we’ve received ACRs for over 7,200 funds, with 22,200 contraventions being reported. This is an increase of nearly 22% in the number of SMSFs with ACRs lodged compared to the same period in the 2021 financial year.
The 2 most common contraventions relate to loans to members and trustees not separating their personal and business affairs from their SMSF.
It’s important to be aware that inappropriately accessing the funds and assets of the SMSF for personal use – such as a loan to a member or accessing super to support a business – constitutes contraventions which may attract additional tax, penalties and/or the disqualification of trustees.
We find the main drivers of regulatory contraventions are financial stress, poor record keeping and a lack of understanding of the rules. How we respond to breaches depends on a number of factors, such as the impact of the breach on the fund, the compliance history of the trustee and their attitude to meeting future regulatory obligations. As you would expect, we treat a simple mistake very differently from someone who shows a blatant disregard of the law.
There are a range of sanctions that we may apply. For instance, in 2021 we disqualified 205 trustees and other contraventions attracted administrative penalties. This can have wide-ranging impacts as the disqualifications are published and the penalties can be significant particularly when trustees treat their SMSF bank account as if it‘s their personal ATM. For instance, many trustees do not understand every incidence of illegal early access from their fund may attract its own penalty.
A recent decision by the Administrative Appeals Tribunal (AAT) provides a good example of the interconnectivity of many of the risks I have highlighted so far.
I am sure this case is familiar to many of you as it involved the purchase of a Church of Scientology course using the SMSF’s funds. The AAT stated that the course had nothing to do with managing the self-managed super fund. It noted that personal deposits and withdrawals from the fund’s bank account indicate it was not maintained for the sole purpose of providing retirement benefits as it provided financial assistance to its member. The AAT also confirmed late lodgment of annual returns was a contravention and using the fund’s bank account on many occasions for personal benefit is a serious matter. It upheld the ATO’s decision regarding the non-complying status of the fund.
We also investigate situations where individuals seek to inappropriately access concessional tax rates for superannuation. This program focuses on identifying SMSFs involved in inappropriate tax planning arrangements and is linked to the ATO’s high-net-worth individuals' program.
We have a particular focus and regularly monitor SMSFs with high asset balances to ensure they have acquired their assets within the regulatory framework and are appropriately accessing superannuation tax concessions. The most common risk we encounter in this area relates to non-arm’s length transactions arising from related party dealings. This often involves the undervaluation of assets acquired from a related party.
What should your clients do if they go off track?
If you identify issues with your client’s affairs, I encourage you to bring it to our attention via our voluntary disclosure service as soon as possible. If the issue involves a regulatory breach, it is important for you to work with your client to develop a rectification plan as this needs to form part of the disclosure.
It is also now a requirement for the relevant voluntary disclosure form on our website to be completed when lodging the voluntary disclosure so we can be sure that we have all the information we need to action it.
Where a SMSF trustee does not use their tax professional to lodge a voluntary disclosure on their behalf, they can lodge one themselves by using our SMSF voluntary disclosure mailbox provided on our website or by using our preferred channel of Online services for business. All SMSFs with an ABN are entitled to register for Online services for business by creating a myGovID account and linking it to your fund’s ABN through relationship access manager. Once they have access, they can:
- view copies of previously lodged SMSF annual returns
- check the fund’s lodgment and income tax account is up to date
- update fund registration details
- lodge transfer balance account reports
- interact directly with us via a secure mail service.
Approved SMSF auditor risk areas
The next risks I will talk to you about relate to SMSF auditors.
SMSF auditors provide a critical service in identifying and reporting contraventions to protect the integrity of the system and, I am pleased to say, we continue to see the vast majority demonstrating a high level of competency and professionalism.
The system is founded on the audit process being independent and adequate. If the auditor identifies any issues in the fund, we rely on the auditor to notify both us and the trustee of contraventions so they may be rectified, and retirement savings remain secure.
Our high-risk auditor compliance work is starting to become a stronger focus for us, particularly compliance with the independence standards impacting firms who provide both non-assurance and auditing services to an SMSF.
The restructured Code of Ethics and the Guide, make it clear that firms who provide both accounting and auditing services to an SMSF client, known as in-house audits, will only be able to continue to do so in very limited circumstances.
Last year we had a strong education focus where we issued detailed guidance on our website and produced a webinar, to help firms comply with the standards. The guidance provides further details on the standards impacting in-house audits as well as some of our concerns around restructuring arrangements.
We expect firms to have familiarised themselves with our guidance and encourage them to also reach out to their professional associations, who are willing to answer enquiries about the application of the standards.
Auditors also now need to ensure that they’re using the updated the SMSF Independent Auditor’s Report to ensure they’re complying with these standards. The new version must be used for all audits completed on or after 1 July 2021, regardless of the income year reported on.
Our compliance approach relies on data and intelligence to identify, risk-assess and deal with higher risk firms, including those who continue to provide in-house audits, are involved in reciprocal auditing arrangements or have a high percentage of fees from a single referral source.
Over the next 12 months, this program of work is expected to deliver increased visibility on how we are working with ASIC as co-regulators to address inappropriate auditor behaviours.
An important example of this joint work was highlighted in a recent ASIC media release where they announced the outcome of 18 ATO referrals involving auditors who contravened the independence requirements because of their involvement in reciprocal audit arrangements. Each of the reciprocal audit arrangements involved 2 SMSF auditors who audited each other’s personal SMSFs.
ASIC accepted voluntary cancellations or imposed conditions on the registration of these auditors because of the self-interest and familiarity issues which threatened the auditor’s independence. There are no safeguards that can reduce these threats to an acceptable level, so the auditors should not have entered into these arrangements.
In other recent reviews we’ve conducted, which resulted in referrals to ASIC, we’ve identified some common issues such as failing to obtain sufficient audit evidence to support the market valuation of property and transactions with related parties. We also commonly find audits lacking documentation to support the conclusions reached, which is critical to enable us to determine that the audit has been conducted appropriately. This is the case even if there was no contravention.
SAN misuse
Another focus area of our program is identifying SMSF Auditor Number misuse, which we refer to as SAN misuse. SAN misuse occurs where an approved SMSF auditor’s details have been incorrectly reported on an SMSF’s annual return.
In the last 3 years, we have invested heavily in identifying instances of SMSF annual returns being lodged where an auditor’s details have been entered incorrectly or an audit has not been undertaken.
This work relies heavily on the assistance of auditors responding to our mailouts containing the lists of funds which have quoted their auditor number.
Where deliberate misuse is detected, we make referrals to the Tax Practitioners Board (TPB) for further action. The effectiveness of this strategy can be seen in a recent decision by the AAT in October 2021 to uphold the 3-month suspension against a tax agent who prepared and lodged 20 SMSF annual returns with details of audits that had not been done.
As a consequence of this strategy, we have noticed a significant shift in the behaviour of certain tax agents and trustees in lodging annual returns with the correct SAN quoted.
We have continued to track SAN misuse for 2020 annual returns via a mailout in September 2021. This was followed up in January of this year via a reminder email to those who had not responded.
We expect approximately 70% of auditors will respond to these requests by the end of April. We will then be seeking to take compliance action to review the 1,300 or so instances where we have been informed that SAN misuse may have occurred.
Meeting your own obligations
We are particularly concerned about some tax agents and auditors that have their own personal SMSF lodgment obligations outstanding. We hold industry professionals to a higher standard when it comes to meeting their tax and regulatory obligations and we will be issuing our first batch of red warning letters to this group soon.
The letter is a final warning to the trustee to lodge their outstanding returns or we will disqualify them. Tax professionals should take these letters seriously as it may have an impact on their professional reputation and registration.
Topical issues and reminders
For the final part of my presentation, I will be focusing on a number of key changes relevant to the sector and the support and guidance we provide to help you navigate this every changing landscape.
NALI
So, let’s start with an area which has attracted a lot of interest being last year’s release of Law Companion Ruling 2021/2 dealing with non-arm’s length expenditure (or NALI as we like to call it).
I don’t intend to cover this in detail but, for any of you not familiar with the topic, I would like to reiterate a few basic principles which are addressed in the ruling. Please note my comments focus only on SMSFs. We know there are some differences in how an SMSF operates compared to large APRA regulated super funds but, given the focus of the session, I will steer away from that today.
Firstly, and most importantly, the law requires trustees to enter into all transactions on an arm’s length basis to access concessional rates of tax. The ruling makes it clear that if a service is provided to the fund by a member in their capacity as a trustee of the fund, then they can’t charge the fund for this service and NALI rules won’t apply. However, services provided in a professional capacity by an individual (that is, other than as trustee of the fund) must be charged for on an arm’s length basis. Funds may enter into arrangements that lead to it receiving discounted prices, provided the discount is consistent with normal commercial practices.
In terms of our SMSF compliance response to non-arm’s length expenditure of a general nature, we currently have in place Practical Compliance Guideline PCG 2020/5 which advises we will not be allocating compliance resources for the 2019, 2020, 2021 and 2022 financial years to determine whether the NALI provisions apply.
With this date fast approaching, from 1 July 2022 trustees can rely on the compliance approach in the LCR which stipulates for SMSFs, that any investigation of general fund expenses will only be directed toward ascertaining whether the parties have made a reasonable attempt to determine an arm’s length expenditure amount.
I also want to take this opportunity to thank professional associations, such as the SMSF Association, for engaging in the LCR consultation process and making representations about other areas where further guidance is required.
On this point, we are currently progressing our response to these matters and are planning to meet with the SMSF Association and others in the coming months.
We have also recently published a revision to PCG 2016/5 to extend the compliance approach so that, when a trustee ensured their limited recourse borrowing arrangements (LRBAs) entered into prior to 2014–15 were made consistent with an arm’s length dealing by 31 January 2017, we will not apply compliance resources in relation to the application of the NALI provisions to those arrangements.
Finally, before we move on to the next topic, I must acknowledge the recent government announcement regarding their intention to consult with industry stakeholders about the operation of the NALI provisions. I want to confirm that despite this announcement, the ATO must continue to administer the law as it currently stands. As always, we will also provide appropriate support to government and Treasury where required.
Many of the other changes that have occurred over the last few years many of you will know about, and some are being covered by other speakers at this conference, but to give you a summary:
- SMSFs can now have up to 6 members and from the data we have been able to collect, around 500 funds have 5 or more members
- the requirement from 1 October last year for SMSFs to use SuperStream when rolling over an amount from an APRA fund
- the transition for auditors from using the old eSAT tool to the ATO’s Online services for business from 1 March this year
- the 50% reduction in the minimum pension drawdown rate has recently been extended for another year.
One important change that I want to ensure you and your clients have paid attention to is the requirement for director IDs.
Director ID
As many of you would already be aware, director ID is a new requirement for all company directors, including SMSFs with a corporate trustee.
The most important thing to remember is if any of your clients are setting up their SMSF with a corporate trustee arrangement, from 5 April they will need to apply for a director ID before they register the fund.
For any existing clients who don’t have their director ID already, I’d encourage them to obtain this sooner rather than later. All directors must have one in place by 30 November 2022.
To apply for a director ID, your clients will need to use the new Australian Business Registry Services (ABRS) website.
This is something they need to do themselves; you can’t apply for it on their behalf. It’s a primary form of identification – you can’t get someone to apply for a passport for you and it’s the same for director IDs.
Conclusion
This brings me to the end of my presentation today, so I’d like to thank you for attending and for the ongoing support you provide to participants in the sector.
The SMSF sector is a large and growing part of the superannuation system, and it is critical that we continue to support it to operate effectively and with integrity to safeguard the retirement savings of many Australians.
Thank you.
Speech delivered by Deputy Commissioner Emma Rosenzweig at the SMSFA National Conference on 21 April 2022.