Recently, the Australian Taxation Office (ATO) has significantly increased its compliance activities within the self-managed super fund (SMSF) sector. This proactive approach comes as a response to the growing number of funds identified as non-compliant with superannuation obligations.
The ATO’s Vigilance in 2023
For the 2023 income year, the ATO has reported a remarkable increase in compliance actions, with double the amount of tax and penalties issued compared to the previous year. This equates to a staggering $29 million in income tax liabilities, penalties for administrative and tax shortfalls, and interest on SMSF trustees and/or members. Moreover, the number of trustee disqualifications has tripled, with 753 trustees disqualified in the 2023 income year.
Penalties for Illegal Early Access
One of the primary reasons behind these penalties is the illegal early access of super benefits by fund members. SMSF trustees hold the vital responsibility of ensuring that members meet the required conditions of release before releasing any funds. This includes adhering to conditions with cashing restrictions, which dictate the form and amount of benefit that can be paid.
Common conditions of release include reaching preservation age and retirement, commencing a transition-to-retirement income stream, ceasing employment after the age of 60, turning 65, or the unfortunate event of a member’s death.
Special Circumstances for Early Release
Even when common conditions of release aren’t met, certain special circumstances may still permit the release of super benefits before reaching preservation age. These circumstances include situations where a fund member has terminated gainful employment, experiences temporary or permanent incapacitation, suffers severe financial hardship, or meets conditions for compassionate grounds, has a terminal medical condition, or is participating in the first home super saver scheme.
Obligations and Future Outlook
It’s important to note that SMSFs must undergo an annual audit by a qualified auditor, and the annual return must be lodged in a timely manner. The ATO’s SMSF compliance focus is set to continue through the end of the 2024 income year, with the ATO explicitly stating it will enforce strict measures against trustees who persistently fail to meet their obligations and breach superannuation laws.
Please don’t hesitate to reach out to us for guidance, advice, or any questions you may have regarding your SMSF.
