The tax office has announced that its compliance program for self-managed superannuation funds has been expanded and it will conduct almost 11,000 audits and reviews before the end of the financial year.
In a recent speech to the Institute of Chartered Accountants in Australia, assistant deputy commissioner Ian Read says that tax office audit activities revealed that many trustees don’t even have a basic grasp of the SMSF regulatory framework.
Read describes the attitude of many trustees as “blasé” in light of data that shows 30% don’t understand the “sole purpose” test, 15% have no actual investment strategy, and half take no action to rectify problems when auditors inform them there has been a breach of law.
He says this cavalier attitude is putting millions of dollars of retirement funds at risk, as trustees engage in unwise as well as unlawful transactions with SMSF funds.
“In many cases, there is a blasé attitude on behalf of trustees to lend their retirement funds with little consideration of risk, diversity or the potential for successful recovery action if required,” says Read.
Examples of trustee carelessness include making large unsecured and undocumented loans of SMSF money to related parties or to people who squander the funds, as well as failing to act immediately on auditor contravention reports.
Trustee apathy is leaving many exposed to prosecution, says Read.
“The trustee’s role is an important one. Trustees are responsible for managing their fund and making sure it complies with super and tax laws.
“It’s important they know that even if they use a professional, be it an accountant, tax agent, financial adviser, fund administrator or legal practitioner, the ultimate responsibility for running the fund and making decisions still rests with them.”
To assist trustees discharge their duties appropriately, the tax office is finalising a new publication outlining the regulatory environment for SMFS, and explaining how the taxman regulates the industry.
It is expected that this new publication will be available from mid-March.
There are now more than 372,000 SMSFs in Australia, representing the interests of over 718,000 individuals. Assets have grown to $300.2 billion in the past year.
More than 47,500 new funds registered between 1 January and 31 December 2007.
Registrations spiked in June 2007, with new registrations escalating to 11,444, which was attributed to the new super environment and the one-off opportunity to make an after-tax (or non-concessional) contribution of up to $1 million into super.
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The Australian Prudential Regulatory Authority reports that over the past 10 years, assets in self managed super funds have enjoyed a healthy growth rate of 23% – the highest in the super industry.