Over the past 12-18 months we have seen a heightened level of interest in SMSF establishment as more individuals take a greater interest in the decision making and control of their retirement savings.
This has been reflected in the number of orders through our Smarter SMSF platform too, but one area of frustration has been the timeframe for a fund to become regulated with the Australian Taxation Office (ATO). Whilst there are a number of important and valid reasons for the ATO to undertake ‘checks and balances with each registration, in particular for any illegal early release (IER) activity, it can present a challenge for individuals wanting to transfer super monies from an APRA regulated environment into their newly established SMSF.
Setting expectations for rollovers
Whilst the initial process to prepare documentation to incorporate a trustee company and establish a new SMSF trust deed is a relatively painless experience, in particular through the benefits of automation, the time delay typically starts following submission of a fund’s application for a TFN, ABN, and to become regulated with the ATO.
This registration process can now take up to 56 days for the SMSF be displayed as ‘Registered’ on Super Fund Lookup (SFLU). The initial status will display the fund as ‘Pending’, which means employers and other super funds will not transfer benefits to the fund until the ATO has updated the status on SFLU to ‘Registered’. Only once this status has been issued will the fund be treated as complying and eligible to receive rollovers and employer contributions. Within 7 days of the status being updated on SFLU as ‘Registered’, the ATO will issue a notice of compliance to the SMSF and then display the fund’s status as ‘Complying’.
Registration application delays
It is important to remember that the ATO does not automatically accept every registration application that it receives – each registration is risk assessed to ensure there is no illegal activity that may be occurring with respect to the fund. The ATO as regulator will not accept a fund’s registration where they decide that:
- the parties have not completed the setup steps listed in Eligibility to register and get an ABN;
- the ATO cannot confirm the identity of all of the SMSF’s associates (trustees or directors of the corporate trustee);
- any of the trustees (or director/s) of the SMSF are not able to run an SMSF within the rules.
In many cases, the online registration and ABN application tool will be checking answers as they are being entered on the ABR website and will advise as to whether the SMSF cannot be registered (and an ABN cannot be provided) even before the application is submitted.
In other cases where the ATO cannot be sure of the eligibility based on the answers provided alone, the Regulator will withhold the registration whilst an investigation takes place. During this time, a fund will be unable to transfer money from another super fund into the SMSF until the investigation is completed.
For every SMSF applicant, the ATO considers all the trustees and other entities that they have controlled. This includes considering factors such as:
- history of insolvency
- crimes related to dishonesty
- previous SMSF history
- personal lodgment and payment history
- super balance and income
- information about identities that have been used fraudulently.
If the ATO has any concerns about an application, they will withhold the registration and make contact to let the trustees and/or tax agent know that they are investigating the application. The ATO advises that most of the cases are resolved in under two months, but it can take longer where a more extensive investigation is needed or the applicant trustees do not assist us fully.
You can find out more about this process on the ATO website and SMSF Investment Strategy page.