Powered by MOMENTUM MEDIA

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.

Proposed SMSF reporting measures slammed as ‘unreasonable’

The Treasury has released amendments for consultation which would require the accounts and statements of an SMSF to be prepared at least 45 days before the date they are required to be lodged.

SMSF Miranda Brownlee 04 November 2020
— 2 minute read

The Treasury recently released for consultation a range of miscellaneous amendments to portfolio laws which include a significant change to the reporting obligations for SMSFs.

Advertisement
Advertisement

The explanatory statement states that the new regulation will require the accounts and statements of an SMSF to be prepared at least 45 days before the day by which section 35D of that act requires a return to be lodged for the entity.

“This is the same day by which an approved SMSF auditor must be appointed under subsection 35C(1) of that act,” it explains.

Smarter SMSF chief executive Aaron Dunn said the application of the amending regulations will apply in relation to the accounts and statements for all funds.

“These proposed changes would align the finalisation date of the financial statements with the final date that an SMSF auditor can be appointed for an income year by the fund trustees,” Mr Dunn said.

With the different lodgement dates that apply for SMSFs, Mr Dunn said this 45-day period could mean in some instances the financial statements would need to be finalised by 16 September, less than three months after the end of the financial year.

He noted that some funds may not even have all the fund information required in order to complete the financials by this stage where they’re waiting for tax statements or details of distributions from other trusts.

“Such a decision to impose this measure could arguably lead to trustees ‘backdating’ the signing of financials to ensure compliance, something that doesn’t serve the trustee or regulator any type of satisfactory outcome,” he stressed.

Where trustees breach the requirements in section 35B of the SIS Act, Mr Dunn said an administrative penalty of 10 penalty units applies.

“This could mean a penalty of $2,220 each for individual trustees, or $2,220 for directors of a corporate trustee where they are joint and severally liable,” he added.

“This certainly seems excessive in the context of the fund’s due date for lodgement of the SMSF annual return still 45 days away. Even more so, when you consider that an auditor is required to provide an audit report to the trustees within 28 days of having received all relevant [documents] to undertake the audit.”

SMSF Association deputy chief executive Peter Burgess agreed that it would be unreasonable for an SMSF, which lodges their SAR on time, to incur an admin penalty because they failed to have their financial statements prepared 45 days prior.

“Currently, the SAR doesn’t have a field for the date the financials were completed, so it’s also not clear how the ATO would monitor this,” Mr Burgess said.

Mr Burgess said the amendment is most likely being contemplated to reduce instances of late lodgements and illegal activity. 

“While we obviously support measures to improve compliance, in this instance, we are not convinced imposing another statutory deadline, and giving trustees less time to prepare their financial accounts each year, is the best approach,” he said. 

Following the recently released ATO Law Administration Practice Statement on the application of admin penalties, Mr Burgess said it is likely that a remission would apply in situations where the SMSF had lodged their SAR on time but not their financial statements, but this would depend on the circumstances of each case.

The Treasury is seeking consultation on the amendments until 17 November.

Proposed SMSF reporting measures slammed as ‘unreasonable’
image intro
accountantsdaily logo
SMSF
FROM THE WEB