An SMSF can give you more control over your investments and tax outcomes, and it can also provide access to some investments that are unavailable to regular (APRA-regulated) super funds, according to The New Daily’s super expert Craig Sankey.
But you need to be aware of the risks, the costs and the responsibility you are taking on when opening a SMSF, as you are not only a member of the fund, but the trustee in most cases as well.
“Although you can seek professional help from advisers, auditors and accountants, you are personally liable for the fund’s decisions,” Sankey warns.
The costs of running an SMSF can be a lot higher than people expect. According to an ATO report in 2019, the average annual operating cost of running an SMSF was $6450, and the median cost was $4069.
On top of these costs could be a hefty penalty for not lodging an income tax return on time, with one deadline looming tomorrow, according to Sam Myers, Senior Accountant, Superannuation at BDO.
Failing to lodge a self-managed superannuation fund (SMSF) income tax return with the Australian Taxation Office (ATO) before the lodgement deadline can have significant consequences for trustees and their SMSFs.
Due dates
Your SMSF tax return due date will vary on your situation:
Financial penalties
The most immediate consequence of lodging an SMSF income tax return late is the imposition of failure to lodge (FTL) penalties.
The ATO calculates the FTL penalty for an SMSF at the rate of one penalty unit for each period of 28 days that the income tax return is overdue, up to a maximum of five penalty units.
From 1 July 2023 onwards, a penalty unit amount applied is, $313.00, this means that a maximum of $1,565.00 can be applied for failure to lodge penalties per overdue income tax return.
Change of Super Fund Lookup status
Super Fund Lookup is the ATO’s register of SMSF’s current compliance statuses, and can be used by employers to determine if an SMSF is eligible to receive contributions.
When an SMSF income tax return is two weeks overdue, the compliance status of an SMSF will be changed to “regulatory details removed” and the SMSF will be unable to:
- Receive or make rollovers from/to other superannuation accounts; or
- Receive employer concessional contributions (superannuation guarantee and/or salary sacrifice).
Once the SMSF’s outstanding income tax returns are lodged with the ATO, the SMSF’s Super Fund Lookup status will update on the first day or the fifteenth day of the following month.
Other consequences
In addition to the above penalties, there are further sanctions the ATO can apply, including:
- Enforceable undertaking
- Rectification direction
- Administrative penalties
- SMSF deemed non-compliant, this results in the SMSF tax rate being the highest marginal rather than the concessional 15 per cent tax rate
- Disqualification of a trustee
- Civil and criminal penalties
- Freezing SMSF assets.
How we can help
Catching up can be challenging once an SMSF falls behind on income tax return lodgements.
This can be a significant administrative burden for Trustees and may require professional assistance when engaging with the ATO.
BDO’s superannuation team has a great track record of successful outcomes when engaging with the ATO in compliance issues and rectifying overdue income tax return lodgements.
If you have any questions regarding outstanding returns or compliance issues, please contact your local BDO adviser.
