The Australian Taxation Office (ATO) has confirmed it does have the ability to render an SMSF non-complying if the trustees do not lodge the required tax return for the fund.
"We can in fact make the fund non-complying because it is a contravention not to keep accounts, not to get the fund audited, and not to lodge the return with the regulator," ATO assistant commissioner superannuation Stuart Forsyth said.
It had previously been reported the ATO did not have this power because the rules governing the lodgement of tax returns for a fund were contained in the Tax Act, while it is the Superannuation Industry Supervision Act (SIS Act) that contains the provisions whereby a fund can be deemed non-complying.
Small Independent Superannuation Funds Association (SISFA) chair Michael Lorimer confirmed the ATO position.
"Under the SIS Act it is a contravention by the trustee if an SMSF has failed to lodge a return for a year of income. Because it is a contravention, that is grounds to invoke the ATO's penalty regime," he said.
"For a fund to be rendered non-complying requires there to have been a contravention of a provision of the act and it is quite clear failure to lodge a return definitely constitutes a contravention of the act and an offence.
"So, that basically means the tax office is in a position in those situations to look at what penalties they may seek to impose."
The SMSF return is now lodged as one reporting package that includes financial statements, the audit report for the fund, and the tax return.
Lorimer said if the tax return is not completed, the annual return cannot be lodged with the regulator which can lead to the trustees contravening their SIS Act obligations.
"Making funds non-complying is not something we want to do. We want the returns," Forsyth said.
