Consequences of outstanding SMSF annual returns

Failing to lodge a self-managed superannuation fund (SMSF) income tax return with the Australian Taxation Office (ATO) before the lodgement deadline can have significant consequences for Trustees and their SMSFs. In this article, Sam Myers, Senior Accountant, Superannuation, discusses the repercussions of lodging an SMSF annual return late.

Due dates

Your SMSF tax return due date will vary on your situation:

Who Prepares?	Lodgement Type	Lodgement Due Date
Self-Prepared	Newly established SMSFs	28 February
	SMSFs with overdue returns for prior financial years	31 October
	All Other SMSFs	28 February
Tax-Agent	Newly established SMSFs	28 February
	SMSFs with overdue returns for prior financial years	31 October
	All Other SMSF’s	15 May

Financial penalties

The most immediate consequence of lodging an SMSF income tax return late is the imposition of failure to lodge (FTL) penalties. The ATO calculates the FTL penalty for an SMSF at the rate of one penalty unit for each period of 28 days that the income tax return is overdue, up to a maximum of five penalty units.

From 1 July 2023 onwards, a penalty unit amount applied is, $313.00, this means that a maximum of $1,565.00 can be applied for failure to lodge penalties per overdue income tax return.

Change of Super Fund Lookup status

Super Fund Lookup is the ATO’s register of SMSF’s current compliance statuses, and can be used by employers to determine if an SMSF is eligible to receive contributions.

When an SMSF income tax return is two weeks overdue, the compliance status of an SMSF will be changed to ‘regulatory details removed’, and the SMSF will be unable to:

Receive or make rollovers from/to other superannuation accounts; or
Receive employer concessional contributions (superannuation guarantee and/or salary sacrifice).

Once the SMSF’s outstanding income tax returns are lodged with the ATO, the SMSF’s Super Fund Lookup status will update on the first day or the fifteenth day of the following month.

Other consequences

In addition to the above penalties, there are further sanctions the ATO can apply, including:

Enforceable undertaking
Rectification direction
Administrative penalties
SMSF deemed non-compliant, this results in the SMSF tax rate being the highest marginal rather than the concessional 15 per cent tax rate
Disqualification of a trustee
Civil and criminal penalties
Freezing SMSF assets.

How we can help

Catching up can be challenging once an SMSF falls behind on income tax return lodgements.

This can be a significant administrative burden for Trustees and may require professional assistance when engaging with the ATO.

BDO’s superannuation team has a great track record of successful outcomes when engaging with the ATO in compliance issues and rectifying overdue income tax return lodgements.

If you have any questions regarding outstanding returns or compliance issues, please contact your local BDO adviser.

Disclaimer

The information contained in this publication is purely factual in nature and does not take into account your personal objectives, financial situation or needs. It is provided as an information service only and does not constitute financial product or other professional advice and should not be relied upon as such. Before making any investment or financial decisions you should consider your particular objectives, and financial circumstance or needs. Where information relates to a particular financial product you should obtain and consider the relevant Product Disclosure Statement and obtain advice from a financial adviser before making any decision. If you do require financial advice, please contact the relevant BDO member firms in Australia who will be able to assist you in their capacity as an Australian Financial Services licensee. BDO Australia Ltd and each BDO member firm in Australia, their partners and/or directors, employees and agents do not give any warranty as to the accuracy, reliability or completeness of information contained in this publication nor do they accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it, except in so far as any liability under statute cannot be excluded.

BDO refers to one or more members of a national association of separate entities who are all members of BDO Australia Limited, an Australian company limited by Guarantee. BDO Australia Ltd and its members are independent member firms of BDO International Ltd, a UK company limited by guarantee. Each BDO member firm in Australia is a separate legal entity and has no liability for another entity’s acts and omissions. Liability limited by a scheme approved under Professional Standards Legislation.

BDO is the brand name for the BDO network and for each of the BDO member firms.