15
Aug

Recent ATO Compliance Activities: What SMSFs Need to Know

The Australian Taxation Office (ATO) continues to increase its focus on compliance activities related
to Self-Managed Superannuation Funds (SMSFs). In 2024, the ATO has introduced new initiatives and
guidelines aimed at ensuring that SMSFs operate within the legal framework and adhere to
superannuation laws. This blog will outline the key areas of ATO compliance activities that SMSF
trustees need to be aware of.

1. Enhanced Data Matching and Reporting

The ATO has expanded its data-matching capabilities in 2024, allowing for more accurate and timely
identification of non-compliance issues within SMSFs. This enhanced data matching includes:

  • Cross-Referencing with Other Agencies: The ATO is working closely with other government
    agencies, such as the Australian Securities and Investments Commission (ASIC) and the
    Australian Prudential Regulation Authority (APRA), to cross-reference data and identify
    discrepancies.
  • Real-Time Reporting: The ATO is moving towards real-time reporting of SMSF transactions,
    particularly in relation to contributions, pension payments, and investments. This means
    that any discrepancies or irregularities can be detected and addressed more quickly.

SMSF trustees should ensure that all fund transactions are accurately recorded and reported to
avoid triggering ATO scrutiny.

2. Focus on Non-Arm’s Length Income (NALI)

Non-Arm’s Length Income (NALI) has been a major focus of ATO compliance activities in recent
years, and 2024 is no exception. The ATO is closely examining SMSF transactions that may be
deemed non-arm’s length, particularly in relation to:

  • Investment Income: Income generated from investments where the terms are not at arm’s
    length, such as related-party transactions, may be taxed at the highest marginal rate.
  • Expense Management: Expenses that are not at arm’s length, such as undercharging for
    services provided to the SMSF, can also result in NALI.

Trustees should review all SMSF transactions to ensure they are conducted on commercial terms
and in compliance with ATO guidelines.

3. Scrutiny of Investment Strategies

The ATO continues to emphasize the importance of having a well-documented and compliant
investment strategy for SMSFs. In 2024, the ATO has increased its scrutiny of investment strategies,
particularly focusing on:

  • Diversification: The ATO expects SMSFs to have a diversified investment portfolio that aligns
    with the members’ retirement goals and risk profiles. Investment strategies that are heavily
    concentrated in a single asset class, such as property, may attract ATO attention.
  • Liquidity Management: The ATO is also examining whether SMSFs have sufficient liquidity to
    meet their obligations, such as pension payments and lump-sum withdrawals. Trustees
    should ensure that the fund’s investment strategy includes provisions for maintaining
    adequate liquidity.

Regularly reviewing and updating the SMSF’s investment strategy is crucial to maintaining
compliance.

4. Monitoring of Early Release of Superannuation

The ATO has intensified its monitoring of early release of superannuation, particularly in light of the
COVID-19 pandemic and the subsequent changes to early release rules. In 2024, the ATO is focusing
on:

  • Unauthorized Withdrawals: The ATO is targeting SMSFs that have allowed unauthorized
    early access to superannuation funds, which can result in significant penalties.
  • Compassionate Grounds and Severe Financial Hardship: Trustees must ensure that any
    early release of superannuation on compassionate grounds or due to severe financial
    hardship is properly documented and complies with ATO guidelines.

SMSF trustees should be aware of the strict rules governing early release and ensure that any
withdrawals are fully compliant with superannuation laws.

5. Compliance with Contribution Caps

The ATO is closely monitoring compliance with contribution caps, particularly in relation to
concessional and non-concessional contributions. Key areas of focus include:

  • Excess Contributions: The ATO is vigilant in identifying excess contributions, which can result
    in additional tax liabilities for the SMSF and its members.
  • Bring-Forward Rule: Trustees should ensure that any use of the bring-forward rule for non-
    concessional contributions is accurately reported and does not exceed the allowable limits.

Accurate record-keeping and regular monitoring of contributions are essential to avoid excess
contributions and potential penalties.

Conclusion

The ATO’s compliance activities in 2024 reflect a continued focus on ensuring that SMSFs operate
within the legal framework and adhere to superannuation laws. From enhanced data matching and
scrutiny of investment strategies to monitoring early release and contribution caps, SMSF trustees
must stay informed and proactive in managing their compliance obligations.

If you need assistance with ensuring your SMSF remains compliant with ATO guidelines or require
help in navigating the complexities of SMSF regulations, our team of SMSF experts is here to help.
Contact us today for personalized advice and support.