SMSFs: ATO supervisory levy must be paid in advance

The ATO supervisory levy payable by SMSFs each year has been increasing in leaps and bounds over the past few years. The levy payable each year now sits at $259 and this amount is payable in advance. For a new SMSF what this means is that you would pay double the SMSF levy in your first year.

Effective since the 2013/2014 year, the ATO supervisory levy for self-managed superannuation funds increased to $259 a year. While for the 2012/2013 year, the SMSF levy was only $191. For the 2015/2016 year, the annual SMSF levy is $259.

Later in this article, you can find a detailed table explaining how much the SMSF ATO supervisory levy will be for each financial year – how did $388 for the 2013/2014 year work for you? This special jump in the ATO levy represented the remaining 50% of the 2013/2014 levy ($129) and the full levy for the 2014/2015 year of $259. In other words, the ATO levy is fully paid in advance from the 2013/2014 lodgement period.

Note: If you register a new SMSF during the 2015/2016 financial year, your SMSF can expect to pay a whopping $518 for the ATO supervisory levy (representing the 2015/2016 and 2016/2017 levy) at return lodgement time. If you registered a new SMSF during the 2014/2015 financial year, likewise you can expect to pay $518 for the ATO supervisory levy when lodging the 2014/2015 SMSF return.

This revenue raising measure (of increasing the SMSF levy and paying the levy in advance) is designed to give the federal government $319 million over 3 years. For those interested in the history of this increase, the Government announced this levy hike as part of the 2012/2013 Mid-year Economic and Fiscal Outlook (MYEFO), released on 22 October 2012.

SMSFs must pay levy in financial year

Background: In the 2012/2013 Mid-year Economic and Fiscal Outlook (MYEFO), the Government stated it “will reform the levy imposed on self-managed superannuation funds (SMSFs), by ensuring the levy is collected from SMSFs in a more timely way…”.

What this means is that the Government has brought forward the payment of the SMSF levy so that it is levied in the same year of income, rather than when the SMSF trustees lodge the tax return for the super fund. This new measure was phased in over two financial years (2013/2014 and 2014/2015), although the practical effect of this timing change is that you would have needed to allow for a hefty ATO whack in the 2014/2015 year.

The former ALP government indicated that the ATO supervisory levy will continue to increase because the Government claim that there continues to be “a shortfall of SMSF levy revenue compared to the costs of regulating the sector”, and that it wants to ensure “full cost recovery”.  It seems that the government is collecting more than it needs from SMSF trustees, based on promises made by the Liberal government: see SuperGuide article Broken promises? Government fails to cut SMSF ATO levy.

For the record, if you run your SMSF properly, very little of this ATO levy goes towards regulating your super fund. The majority of the money raised goes towards investigating and monitoring the SMSFs that are not doing the right thing, and a big chunk of the money raised chases criminals who rip off Australians with super accounts with large super funds (that is, APRA-regulated super funds). These criminals help naïve Australians to access superannuation benefits from large funds, or simply steal identities of super fund members. The cost of monitoring this activity has very little to do with legitimate SMSFs, and has more to do with poor reporting and processing systems of the larger super funds.

In my view, the additional cost of this monitoring activity of dodgy SMSFs by the ATO should be imposed on the large fund sector not the SMSF sector.

SMSF sector not the honey pot for the industry

The government has increased the ATO supervisory levy by 575% over a 5-year period up to the 2013/2014 year, and the hike to $259 represents the fourth increase in that time. The timeline of increases is set out below:

  • Until the 2007/2008 year, the ATO levy was $45
  • From 2007/2008 year, the levy trebled to $150
  • From 2010/2011 year, levy jumped to $180
  • For the 2011/2012 year, the levy increased to $200
  • For the 2012/2013 year only, the levy drops to $191, but must pre-pay 50% of 2013/2014 levy ($130), taking the total to a whopping $321 for the year.
  • From the 2013/2014 year, the ATO levy increases to $259, but must pre-pay 100% of 2014/2015 levy ($259), taking the total to $388 for the year.
  • For the 2014/2015, 2015/2016 and 2016/2017 years, the ATO levy remains at $259 but must be paid a year in advance

How the SMSF ATO levy hike worked (an example): For those preparing or lodging the 2012/2013 self-managed super fund tax return you may have received a rude shock when you discovered the ATO had hit your SMSF with a whopping $321 supervisory levy for the year. The ATO levy was supposed to be $191 for the 2012/2013 financial year, so where did the ATO come up with the amount of $321, an extra $130 for your SMSF to find at lodgement time? And was this amount going to increase again for the 2013/2014 financial year? Well, the $321 ATO supervisory for the 2012/2013 year was a combination of the $191 levy payable for the 2012/2013 year, and 50% of the 2013/2014 levy which must be paid in advance. Effective from the 2013/2014 year, the ATO supervisory levy for self-managed superannuation funds was set to jump again, increasing to $259 a year. So, 50% of $259, rounded-up is $130, which meant when the $191 for the 2012/2013 year was added to the $130 pre-paid for the 2013/2014 year, then you get the magic figure of $321.

SMSF ATO Supervisory levy for 2013 to 2017 financial years

The contents of the tables below have been sourced directly from the ATO website:

  • ATO levy for ongoing SMSFs (Table 1)
  • ATO levy for SMSFs wound up during the financial year (Table 2)
Table 1: ATO Supervisory levy for ongoing SMSFs
SMSF annual returnNot newly registeredNewly registered during relevant financial year
 Levy payableYear of levyLevy payableYear of levy
2012/2013$321 ($191 + $130)2013 (100%)$321 ($191 + $130)2013 (100%)
2014 (50%)2014 (50%)
2013/2014$388 ($129 + $259)2014 (50%)$518 ($259 + $259)2014 (100%)
2015 (100%)2015 (100%)
2014/2015$2592016 only$518 ($259 + $259)2015 (100%)
2016 (100%)
2015/2016$2592017 only$518 ($259 + $259)2016 (100%)
2017 (100%)

Source: Adapted from ATO website

Table 2: ATO Supervisory levy for SMSFs wound-up during the financial year
SMSF annual returnNot newly registeredNewly registered during financial year
 Levy payableYear of levyLevy payableYear of levy
2012/2013$1912013 only$1912013 only
2013/2014$1292014 (50% only)$2592014 only
2014/2015Nil2016$2592015 only
2015/2016Nil2017$2592016 only

For more information on these past ATO levy hikes and what the ATO intends to do with your money, please check out the SuperGuide article SMSFs: Is the ATO supervisory levy value for money? For more detail on the actual levy amounts see the ATO website.

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Comments

  1. Misterdiz says:

    It’s depressing, another disproportionate cost hit to my struggling smsf. This labor government gouges as it likes, just like the big corporations. In the end we’ll have no or little super and safety net. Bring on the election, bring back Johnny Howard to reverse labor’s superannuation changes to what they were.

  2. Thanks for getting to the bottom on this insidious guvmint deceit; I searched high and low on the ATO website without success but, then again, I’m not the lawyer you are. And, I agree with your comment, those APRA regulated funds ought to be paying this hike, but we all know that Short Willy is their best mate so how can us plebs compete.

    Now that my smerf is full pension mode, I’m seriously considering cashing out and returning to personal tax returns should my wife and I be so fortunate in garnering more income than the law allows for non-filers.

  3. The Federal Government must be really broke!!!

  4. How do we pay the $321 supervisory levi before the end of the 2013 tax year. Can we obtain a PRN number to pre pay ATO and then include the levi as expense in the 2013 tax return.

    If the levi cannot be paid before the 30 /06/2013 and we want to ensure that the fund closing balance is correct and that pension minimum benefits can be accurately calculated. Where is the ATO liability accounted for and do we need additional note to ensure that the Auditor can recognise the liability and the unbalanced closing fund balance. An more importantly pass the fund as compliant.

  5. yes, very informative. Shows the current governments real ‘personality’.

  6. Thank you for a very informative news letter

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