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Who is the ATO targeting and why?
The ATO recently released some information on the results of their compliance and audit activity over the past 12 months.
The focus was on overdue and outstanding lodgements of returns.
The most common audit contraventions reported were loans and in-house assets, but in more than 50% of cases the trustees had already rectified the issues before they were reported to the ATO.
A review was conducted of the top 100 SMSFs (in terms of $$), these 100 funds have a combined asset value of $7.9 billion! The ATO determined that 35% warranted a more detail review for a range of potential issues, including the use of limited recourse borrowing arrangements, non-arm’s length arrangements and rapid and excessive growth rates.
During this time, 257 trustees were disqualified from running a SMSF. In the majority of cases, this was due to trustees participating in the illegal early release of SMSF benefits and loans to members.
The ATO have advised that they will continue to focus on illegal early release, non-lodgement of returns and the top 100 SMSFs. Further focus areas for the next 12 months will include the use of reserves within SMSFs, the use of multiple SMSFs, transfer balance cap (TBC) compliance and limited recourse borrowing arrangements. There is also an added focus on reviewing auditors and the audit contraventions being lodged.
Bottom line is, the majority of SMSFs are doing the right thing and following the law and are therefore unlikely to have any issues. The focus is on the small minority of SMSFs that are not doing the right thing.