Tax office may soften SMSF rules

The Australian

11 October 2017

James Kirby

More changes are looming in the superannuation sector

Controversial and laborious event-based reporting rules for Australia’s army of DIY super fund operators may be softened by the tax office in coming weeks.


Under current plans the Australian Taxation Office wants all SMSFs (self-managed super funds) to report much more regularly to Canberra.

At present most SMSFs need only deal with the tax office once a year at  “tax time”.

But the ATO ultimately wants funds reporting “event-based” activity on a monthly  basis.

The new reporting rules are set to begin on a quarterly basis under a two-year phase-in, starting on July 1 next year.

The new reporting regime has the potential to affect a lot more fund operators than this year’s changes in pension tax rules.

The majority of funds will not be affected by the tax rule changes around a $1.6 million individual balance cap introduced on July 1. But almost any fund could be caught in a new web of bureaucracy planned by the ATO.

The SMSF Association, which represents professionals in the sector, is lobbying Canberra to make an exemption in reporting requirements for SMSFs with less than $1m in individual assets.

Such an exemption would make a lot of sense in the current framework which already effectively exempts this group from the extra tax potentially loaded on funds that breach the new balance cap.

Jordan George, head of policy at the SMSF Association says: “We are expecting to hear where the ATO has got to on the issue in the next fortnight.”

ATO Assistant Commission Kasey McFarlane recently told an industry conference the idea of the exemption for funds with less than

$1m was currently under consideration.

The “event — based” reporting requirements centre on major movements of money inside SMSFs such as starting a pension or lump sum activities.

SMSF operators will be expected to report key events to the ATO within 10 days of the formalised reporting period. Until July 2020 this will be 10 days after the end of each quarter.

There are fears within the SMSF sector that the application of new reporting rules, coming so quickly off the back of a complex regime change around tax rules, will reduce the attraction of DIY funds, which have been enjoying strong growth in recent years.

The key changes under the tax rules were a reduction in the amount that could be contributed on both a pre-tax and after-tax basis to superannuation fund and the imposition of the $1.6m balance cap on super funds which will require tax to be paid on earnings on amounts above this level.