How the ATO will deal with Auditor contravention reports
The ATO has advised that it has developed a new approach to deal with ACRs, based upon the overall risk posed by the SMSF. Using new risk models to determine the appropriate action to take on each SMSF, the ATO will analyse multiple indicators of non-compliance (including both regulatory and income tax matters), drawing information from the SMSF annual return, ACRs and other data, including trustee and members’ records.
This new approach will mean the ATO will deal with all ACRs received with an audit, phone call or letter, shortly after lodgment, as follows.
High-risk SMSFs
These SMSFs will be selected for comprehensive audits that will scrutinise all regulatory and income tax risks displayed by the fund, with a particular focus on repeat offenders. This program will also involve an increasing number of field visits to engage high-risk SMSFs and their tax agents. The ATO will apply SMSF administrative penalties when they confirm a breach is eligible for this penalty.
Medium-risk SMSFs
The ATO will take less intrusive action on SMSFs assessed as medium risk. They will engage directly with trustees to discuss the reported contravention, remind trustees of their obligations, and encourage compliance in future. This action will usually occur within 6 to 8 weeks of the ACR lodgment. In the majority of cases, if the trustee can assure the ATO that they understand their obligations, the issues reported in the ACR will be closed and no penalties applied. Through this treatment, the ATO aims to intervene before more serious comprehensive audits are required.
Lower-risk SMSFs
The ATO will issue tailored correspondence to SMSFs they assess as lower risk, reminding trustees of their obligations and encouraging compliance in future. The issue reported in the ACR will be closed with the issuing of this letter, which will usually occur within 6 to 8 weeks of lodgment of the ACR.
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