You may want to re-think lodging your SMSF tax return late.
Lodging your self-manage super fund (SMSF) annual return on time is a fundamental part of your obligations as an SMSF trustee. It’s also become more important than ever to lodge your return on time.
From 1 October 2019, if an SMSF is more than two weeks overdue on any annual return lodgement due date and hasn’t requested a lodgement deferral, the ATO will change the status on Super Fund Lookup (SFLU) to ‘Regulation details removed’. The ATO are taking this approach because non-lodgement combined with disengagement indicates that a trustee’s retirement savings may be at risk. This status will remain until any overdue lodgements have been brought up to date.
What is the new process?
On the first business day of each month, there is now a two-step process for updating SFLU.
- Where an SMSF trustee hasn’t lodged their SMSF annual return on time and they’re more than two weeks overdue, the ATO will change their SMSF regulation status to ‘Regulation details removed’ on SFLU.
- Where all overdue lodgements are received for an SMSF during the previous month, the ATO will update SFLU to reinstate the SMSF’s ‘complying’ status.
How will this change affect SMSFs?
Having a status of ‘Regulation details removed’ means employers won’t be able to make any super guarantee (SG) contribution payments for members of the SMSF.
The rules are expected to cause administrative headaches for funds relying on contributions or rollovers as part of a broader strategy, especially given previous time delays from the ATO in restoring compliant funds to the SFLU system.
While the status will be returned to ‘complying’ (under the new rules) when the return is lodged, historically this process can take six weeks.
Whatever the length of delay, however, it presents many challenges; for example, what if contributions are an essential part of funding LRBA repayments? What if a rollover is being relied upon to settle a transaction?
What can SMSF trustees/members do?
SMSF trustees can avoid their SMSF status changing to ‘Regulation details removed’. When a lodgement may be late, SMSF trustees should seek a deferral to lodge SMSF annual returns before the due date. This will ensure that their SMSF status remains ‘complying’. Please note if you do not meet the agreed date of referral a ‘Regulation details removed’ status will then be displayed until brought up to date.
While the fund’s status is ‘Regulation details removed’, members should alert their employer to make any SG payments into the employer’s default super fund or a fund of the member’s choice.
Once the SFLU status of the SMSF has been updated to ‘complying’, members can request a rollover to their SMSF of any member benefits that may be held outside their SMSF.