Topping the list of issues, Macfarlane said, was the worrying non-compliance from SMSF trustees, which is a real concern for the ATO because there is just a lack of transparency going on in the fund. During the last financial year, she said, the ATO found an unacceptable number of trustees who operated out of the system and consistently failed to lodge SMSF annual returns. Fortunately, there are only a few cases, and the ATO does detect those cases, she said.

Macfarlane cited the example of a trusted who was fined $40,000 and forbidden from acting as a trustee for grave infractions involving 43 unsanctioned withdrawals from the SMSF for personal use between 2005 and 2012.

The ATO says that a key source of information on compliance issues and regulatory infractions are reported through the auditor contravention reports (ACR). In 2005 alone, there were 22,000 reports for 8,200 funds via the ACR. The ATO reported that almost 11,000 of the infractions reported through the ACR have been fixed.

 Macfarlane however, noted that the ATO will be changing strategy to curb SMSF non-compliance. She said, “Instead, where trustees are willing to engage with us, they will be supported to self-correct and rectify compliance issues through the early engagement and voluntary disclosure service and/or from targeted mail outs.”

She further stated that this new approach, in tandem with an increased emphasis on SMSF auditor independence and quality, will allow the ATO breathing room to pay more attention to compliance activities and enforcement outcomes on:

• Trustees unwilling to engage with the ATO
• Trustees who intentionally and consistently eschew their obligations
• Trustees intentionally working outside of the ATO approved system
• Trustees always looking to implement aggressive income tax positions like executing dividend stripping arrangements (TA 2015/1) or personal income diversion plans (TA 2016/6)

For the ATO, the last three points will be of particular interest over the coming year. Additionally, collectibles also figure high on the ATO’s list of priorities. Collectibles now account for about $428 million in SMSF investments, according to the ATO’s statistical report released in March 2016. Although this figure is only a small fraction of the total SMSF assets, the body reiterates that the new rules on collectible investments which came into effect on the 1st of July, 2016, meant that a compliance review was necessary.