The Australia Taxation Office has released their Compliance Program identifying the hot issues in superannuation for 2013.
The Commissioner of Taxation will be focusing on the trustees of self managed superannuation funds and, in particular, their compliance with:
- income tax reporting requirements with an emphasis on exempt current pension income and non arm's length transactions; and
- ensuring a condition of release has been satisfied before releasing superannuation benefits.
Hot on the ATO radar will also be:
- employers' compliance with their superannuation guarantee obligations including phoenix activity;
- reporting requirements including the lodgement of annual returns and the accuracy of information being reported;
- excess contributions and the re-reporting of excess amounts; and
- large fund compliance with their income tax obligations, such as:
- group life deductions including deductibility of insurance premiums for total and permanent disability;
- compliance with post-tax reporting of investment returns and taxation of financial arrangements (TOFA);
- exempt current pension income claims and taxation of assessable contributions;
- foreign income tax offset;
- fund mergers in the context of the capital loss rollover relief and capital gains tax reporting;
- use of trust structures and tax treatment of distributions; and
- claiming franking credits.
The Commissioner of Taxation expects to issue 29,000 excess contributions tax assessments and 30,000 refund of excess contribution offers where the concessional cap has been exceeded for the first time and the excess amount is not more than $10,000. The ATO will also be confirming that self managed superannuation fund trustees comply with compulsory release authorities.
This broad brushstroke approach is targeting the main areas of superannuation tax compliance and is likely to generate increased audit activity in the superannuation industry.
For the first time, the Commissioner of Taxation will review the top 200 self managed superannuation funds based on total assets and based on a tax and compliance analysis, select 25 funds for a comprehensive audit.
In addition, the Commissioner of Taxation will audit 30 fund trustees that have lodged their annual return late in response to lodgement enforcement action by the ATO. The Commissioner of Taxation also intends to target 1,500 fund trustees that have failed to lodge an annual return. This will put the spotlight squarely on fund trustees that fail to lodge to avoid a breach of the superannuation law from being discovered. However, it will also target otherwise complying funds that are simply late in lodging their annual return.
The Commissioner of Taxation will also contact 3,000 fund trustees in relation to their exempt current pension income claim. Thus it will be crucial that the deduction is calculated correctly and appropriate records maintained.
Approximately 100 fund trustees will be approached by the Commissioner of Taxation regarding non arm's length transactions. We recommend trustees ensure that they receive independent valuations on all assets being bought, sold or leased to substantiate the market value and that all transactions are undertaken on a commercial basis and properly documented.
The auditors are also being audited. The ATO expect to review 150 superannuation auditors in the 2013 income year.
Finally, 400 employers identified as being high risk for non compliance with their superannuation guarantee obligations will be audited. In particular, the ATO will target employers in the following industries:
- cafes and restaurants;
- real estates; and
- carpentry businesses in home building or construction.
In addition, the general superannuation compliance of a further 3,000 employers will be reviewed.
The ATO expects to contact approximately 13,000 employers regarding complaints around unpaid superannuation guarantee contributions on behalf of employees.
The ATO will be approaching 277 superannuation funds regulated by the Australian Prudential Regulation Authority to ensure they are complying with their income tax and reporting obligations. As part of this audit, two fund administrators will be reviewed by the ATO.
Where a fund trustee or employer is being audited, it is crucial to get legal advice at the outset to ensure any legal professional privilege over legal advice received is not inadvertently waived.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.