The SMSF Association welcomes the Australian National Audit Office’s (ANAO) performance audit of the Australian Taxation Office’s (ATO) regulation of self managed superannuation funds (SMSFs).
SMSF Association CEO Peter Burgess says the audit is both timely and important, with the SMSF sector having changed significantly since the ANAO last examined the ATO’s regulation of SMSFs nearly two decades ago.
“Since the ANAO’s previous SMSF audits in 2007, the sector has grown substantially, the regulatory environment has become more complex, and the ATO’s role has evolved from a largely educative approach to a more active regulatory model,” Mr Burgess says.
“That makes this an important opportunity to assess whether the ATO’s approach remains appropriately risk-based, proportionate and clearly anchored to its statutory role.”
The ANAO audit will assess the effectiveness of the ATO’s regulation of SMSFs, including whether the ATO effectively manages SMSF regulatory risks, monitors and reports non-compliance and investigates and sanctions SMSFs that fail to meet their obligations.
Mr Burgess says the review should not be viewed as a critique of SMSFs, but as an opportunity to test whether the regulatory framework is operating efficiently, consistently and within the proper boundaries of the ATO’s role.
“SMSFs now account for more than $1 trillion in retirement savings, so it is critical that the regulatory framework is robust, targeted and trusted,” he says.
Mr Burgess says the audit should examine whether the ATO’s regulatory expectations have remained within what is necessary to administer the law.
“The vast majority of SMSF trustees seek to comply with their obligations. The challenge is to identify and respond to genuine misconduct without imposing unnecessary delays, uncertainty or administrative burden on compliant funds,” he says.
The SMSF Association believes the audit should closely consider the ATO’s approach to SMSF establishments.
“Getting the balance right at establishment is critical,” Mr Burgess says.
“Front-end controls have an important role to play in addressing inappropriate SMSF establishments and illegal early release schemes. But those controls must be risk-based and administered efficiently so legitimate trustees are not caught in unnecessary delays.”
The Association says the audit should also consider the role of SMSF auditors within the regulatory framework, including whether ATO expectations remain clear, proportionate and appropriately targeted.
“SMSF auditors play a critical role in the integrity of the sector,” Mr Burgess says.
“It is important that the regulatory settings support high-quality audit work without imposing expectations that are unclear, duplicative or disproportionate.”
Mr Burgess says the ATO’s unique dual role as both the regulator of SMSFs and the administrator of Australia’s tax and superannuation laws should also be reflected in timely, practical and authoritative guidance.
“Where tax and superannuation obligations intersect, trustees and the industry need clear, accessible and timely guidance,” he says.
“Too often, certainty is sought through non-binding SIS Act specific advice or lengthy private ruling processes. These mechanisms have their place, but they are not always efficient ways of giving the broader sector the guidance it needs.”
The SMSF Association looks forward to engaging constructively with the ANAO during the consultation process and sharing the practical insights of our members.
“This is an opportunity for a balanced, evidence-based review of how SMSF regulation is working in practice,” Mr Burgess says.
“The objective should be a regulatory framework that is firm where it needs to be, practical in its administration, clear about the limits of the ATO’s role and supportive of trustees and professionals who are committed to doing the right thing.”
Further information on the ANAO and this audit can be found here.