Failed to Lodge SMSF Tax Returns? Check Out Consequences

July 13, 2020    Tax Return Perth

The Self-Managed Super Fund (SMSF) is a private fund that is managed personally by an individual themselves. The main difference between SMSFs and other funds like industry funds, retail funds, etc. is that SMSFs are completely self-managed whereas the others are managed professionally. In an SMSF, an individual puts in money that they would have otherwise put in a professionally managed retail fund or industry fund. The individual who owns the fund gets to decide on all the aspects of the SMSF, from the investment options to the insurance plan. They are also responsible for the SMSF audit and tax return and other legal and financial responsibilities. An SMSF can have a maximum of 4 members who are generally family/friends of the fund owner.

What to do if you are unable to file your SMSF tax return on time?

If you have a new SMSF, then you should properly know the deadlines by which you have to lodge all the appropriate tax paperwork and documents. For 2019, the deadline was October 31 for individuals with new SMSFs. For individuals owning existing SMSFs, the deadline was February 28 of the following year. Even if your tax return and paperwork are filed by a taxation agent, you should be well-versed with the red tape and regulations involved.

Lodging the SMSF returns in time is your legal responsibility as the fund owner. Failing to do so will result in substantial financial losses in the form of penalties and revoking of tax benefits. The Australian Taxation Office (ATO) can actually direct fund owners to go through re-education, issue lodge failure penalties, and fines, etc. In really extreme cases, the ATO can also freeze the assets and funds of the SMSF or remove the SMSF from the Super Fund Lookup (SFLU) too. To protect your assets from these penalties, you should lodge your SMSF tax return properly. Here is a closer look at some of the penalties involved.

  • Removal of the SMSF from the SFLU

Self-Managed Super Funds that are not registered on the Self-Managed Fund Lookup (SFLU) will no longer be eligible to receive guaranteed payments and benefits from the super fund and employers. If you do not lodge your SMSF tax returns in time, then you run the risk of being removed from the SFLU. You will now longer be able to enjoy its payment guarantees that are protected by ATO legislation.

  • Re-Education Courses

If you are a first-time offender, the Australian Taxation Office (ATO) will generally direct you to a re-education course conducted by itself. These courses are completely free and available online. It is recommended that you take the courses before setting up an SMSF so that you can go into it in a well-prepared and organized manner. If someone fails to lodge tax return even after they go through re-education, then they will face administrative penalties.

  • Administrative Penalties and Fines

Serious offenders who make late filings will have to pay an administrative penalty or fine to the ATO. Depending on the severity of your failure to lodge tax returns, you can be fined an amount ranging from 1050 AUD to 12600 AUD. This is generally the penalty bracket for individuals who are 1 to 2 years behind on their SMSF audit and tax return. You must meticulously lodge all your tax returns with the ATO to avoid incurring such penalties and fines needlessly.

  • Loss of Tax Privileges

Failure to lodge your SMSF tax return on time can cause the ATO to revoke your tax concessions and privileges. They can declare your SMSF to be non-compliant and revoke all your previous privileges. An SMSF that is in compliance pays a tax rate of only 15%. If you are non-compliant, then you will be charged at the highest possible marginal tax rate. Non-compliance tags can result in you losing a lot of money by charging a very high marginal tax rate.

  • SMSF Owners’ Asset Freeze

This is the most serious consequence of non-compliance. If the ATO has any reason to believe that the benefits of the SMSF are being eroded by non-compliance with ATO laws, then they can order the fund trustee/owner to freeze all assets. A freeze on assets means that the SMSF trustee cannot acquire nor dispose of any of the SMSF assets. This is the worst possible outcome of not lodging your returns on time.

Get in touch with top tax professionals

To avoid any of the above eventualities, you have to look up “tax accountant Perth” and engage their services. SMSF tax compliance also happens to be much more complicated than general individual or business tax returns. Tax agents are professionals who are exceptionally well-versed in the ATO legislation and regulations surrounding SMSFs. They will be able to guide you properly through the quagmire of bureaucratic regulations and red tape. Well placed professional help can help you to make the most out of your SMSF.

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