ATO assistant commissioner Dana Fleming said that as part of the ATO’s compliance program called “secure the front door”, the ATO applies an analytical model to all SMSFs at the time of set-up, which identifies whether there are any risks or red flags with the individual setting up the fund.
Ms Fleming said that out of the 26,000 SMSF registrations in the last financial year, 2,100 were flagged for additional reviews by the ATO’s risk analytical model.
“Of those additional reviews, 681 had their ABN cancelled, and 336 had their details withheld from super fund lookup,” she told delegates at the SMSF Summit at Adelaide last week.
“Super fund lookup, as you know, is where you can go if you’re an APRA fund to look up an SMSF to see if its complying and can indeed receive contributions and rollovers.”
Ms Fleming said the process helps ensure that the individuals setting up an SMSF are genuine and want to do so for the right reasons.
The ATO, she explained, is looking to see that the individual has demonstrated a history of good compliance and that there are no red flags.
“We are looking at whether the SMSF trustee’s financial history is up to scratch, if they have been bankrupt, if they owe debts to the ATO and whether they have a good compliance history with the ATO,” she said.
She also warned that the ATO would be closely looking at the associates of the super fund, including the tax agent.
“We are looking at whether the tax agent associated with the SMSF has a poor history and whether they are linked to previous SMSFs that have been of concern to us,” she said.
“Even structural set up issues correlate with poor behaviour. Is there a lack of care in the way that they have gone about setting up their SMSF? Are the member’s details wrong? Is the financial structure wrong? Obviously, one of the key things in this instance that we’re looking at is that the SMSF has its own bank account, thereby separating the individual’s assets from the SMSF’s assets.”
If any red flags do appear during the process, Ms Fleming said the ATO will then interview the trustee.
“We want to see that they understand what the purpose of their fund is and key things they cannot do, such as taking the money out before they reach a condition of release,” she said.
The ATO’s compliance program for SMSF establishments has come under scrutiny recently, with Senator Cory Bernardi raising a complaint made by an accounting firm that their client was “interrogated” by the ATO for over an hour.
ATO Commissioner Chris Jordan told Senator Bernardi that the Tax Office would review its program to ensure it was “fit and proper”.