SMSF whack! Another 11% increase in ATO supervisory levy

For the 2011/2012 year, the ATO supervisory levy for self-managed super funds has increased from $180 to $200. The levy hike is an 11% increase from the previous financial year, and a massive 400% increase from the ATO levy that was payable 5 years ago.

In the 2012 Federal budget, hidden in the detail of line-by-line expenses and revenue items, the federal government reports that there will be ‘increases in the SMSF levy’ to offset the cost of introducing a SMSF auditor registration process. Note that the government uses the word ‘increases’ rather than ‘an increase’ which seems to suggest that the government is going to continue slugging SMSF trustees with higher ATO levy costs long into the future.

If you’re a SMSF trustee, your ATO levy increase is going to be divvied up between the Australian Securities and Investments Commission (ASIC) and the Australian Tax Office. The Government is providing ASIC with $10.7 million, over 5 years, to develop and maintain an online registration system for auditors of SMSFs. ASIC will also develop a competency exam for SMSF auditors, and ASIC will be able to deregister non-compliant auditors. The Government is giving the ATO $10.6 million, over 5 years, to police registered auditors, check their compliance with competency standards set by ASIC and, if necessary, refer naughty auditors to ASIC for punishment.

Note: Some of the funding for the SMSF auditor registration process will also be sourced by ASIC charging auditors to sit the SMSF auditor competency exam.

Are you getting value for money on the levy increase?

The latest increase in the ATO supervisory levy for SMSFs is the third increase in 5 years. You may recall that it was just over 12 months ago, in the 2011 Federal Budget in fact, that the government announced that the ATO SMSF levy had jumped a hefty 20% (from $150 to $180), effective from the 2010/2011 year SMSF tax return. At the time, the Assistant Treasurer and Minister of Superannuation, Bill Shorten stated: “The introduction of a new administrative penalty framework, registration of fund auditors subject to competency and independence standards, improved data collection and improvements to the self managed superannuation fund registration process” [Assistant Treasurer media release, 10 May 2011]

So, the earlier increase in the ATO levy (from $150 to $180) was to help fund the SMSF auditor registration process, and now this latest increase (from $180 to $200) is also supposed to fund the registration process.

The annual supervisory levy was trebled to $150 (from $45), effective from the 2007/2008 year, to cover just these types of “improvement” in regulation.

I assume someone within government is held accountable for the financial management of this regulatory process, and we have to trust that SMSF auditor registration process will help SMSF trustees run their super funds more effectively and within the law.

The current SMSF auditor requirements stipulate that an individual is not able to audit a SMSF unless he or she is an ‘approved auditor’, namely, that he or she is a member of a specified accounting body (or other recognised association), and as I understand it, the accounting bodies that SMSF auditors must belong to, also require ongoing professional development from its members. If I were a CEO of one of these accounting bodies, I might consider this extra layer of regulation as a potential red flag questioning the ability of accounting bodies to train, deliver and monitor the quality of its members who choose to audit SMSFs. A CEO of one of these accounting bodies may argue that the new SMSF auditor registration system is a costly duplication of what is already in place.

I support a central registry of SMSF auditors who meet specified competency standards, although I am not sure whether ASIC and the ATO, as a tag team, are going to deliver that ideal system, without a recognised monitoring role for the accounting bodies. I do hope that the two regulators can make it work and that it doesn’t become a money pit at the expense of SMSF trustees.