The tax office's blueprint for its priorities in the 11 months ahead - officially known as its compliance program 2009-10 - contains a rather remarkable revelation regarding self-managed super funds.
The owner-operators of Australia's so-called micro enterprises, which have an annual turnover of under $2 million, are trustees of 397,700 SMSFs!
Just think for a second about that number of funds in what the ATO calls "the micro enterprises market".
According to the latest statistics available from the Australian Prudential Regulation Authority (APRA), there were 406,600 self-managed funds in total as at March 31.
Although the total fund numbers would have changed since APRA collected its data, there is no question that smaller business owners overwhelming dominate the SMSF market. The word "overwhelming" almost doesn't seem strong enough to describe the domination.
In fact, the figures seem so remarkable for micro-business owners, don't be surprised to see some sort of revision.
In its compliance program released yesterday, the tax office opens the section on micro enterprises by immediately focusing on the numbers of owner-operators with self-managed funds. It's well worth a read.
A key thrust of the ATO's messages for owners of smaller businesses in 2009-10 is to ensure that their self-managed funds are complying with super and tax law, warning that tax officers will be looking more closely at their funds.
SMSF issues that the tax office - in its role as regulator of these funds - will particularly target in this financial year include:
- Contraventions of the in-house asset rule. (A SMSF must not invest, lend or lease more than 5% of its assets in value to related parties, including members).
- Breaches of the restrictions on borrowing. (Funds can only borrow in strict and limited circumstances).
- Repeated failure of funds to meet their lodgment obligations for annual tax and regulatory returns.
- Non-arm's length transactions. (Investments by a SMSF must be made and kept on an arm's length basis. This means the transactions must be on a full commercial basis.)
If you are a small-business owner with a SMSF, the latest compliance program should be enough of a prompt to review the level of its compliance.