Serious consequences for non-lodging SMSFs in ATO crackdown

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The ability to borrow for property could be seriously thwarted for those that have two or more SMSF returns outstanding and will consequently will be treated as a ‘non-person’ on the super fund lookup database.

The issue was brought to the attention of Michael Hallinan, Special Counsel Superannuation at Townsends Business and Corporate Lawyers, after a visit from a client with exactly this problem.

“A client wanted to do limited recourse borrowing and they were stopped in their tracks,” said Hallinan.

The Australian Taxation Office (ATO) removes any SMSF that has two or more returns outstanding from the super fund lookup database, which displays the regulatory status of the fund when its name or identification number is entered.

As anyone is able to use the website to look up an SMSF, wearing the black mark of not being listed can have a serious impact on the social life of the fund, as well as the ability to receive contributions from employers, rollovers, or transfers, said Hallinan.

And because the website doesn’t have a statutory function in that it was created as a ‘bonus’ rather than a legislative requirement, there is no review or appeal process that a client can take against the ATO if their SMSF is removed due to non-lodging.

Hallinan said the only real way to get re-listed is to lodge the missing returns.

“You’d be better off spending money on an accountant to get the returns lodged than spending money battling the ATO.”

Trustees may not lodge returns for a variety of reasons including a change of advisers or ill health, however Hallinan said the main reason seems to be general slackness.

“For the most part they haven’t got around to instructing the accountant to get the ball rolling,” he said. “[In this case] if the trustees aren’t sufficiently concerned about basic things like that, then perhaps they aren’t paying sufficient attention to the fund.”

 Simply removing a fund for a website seems to be the quickest and most efficient way for the ATO to motivate non-lodging SMSFs to get into gear, he said.

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