ATO focus areas for SMSFs in 2026–27

A useful valuation file identifies the date to which the value relates, the valuation method used, the information relied on and the reasons for any adjustments. For annual financial statements, the evidence must support market value at the relevant financial year-end, ordinarily 30 June.

Direct property, unlisted entities, collectables and other hard-to-value assets are likely to demand particularly robust documentation and may require an independent, professional valuation process to be carried out.

For listed investments, market prices and holding records are easily obtained, so make sure these are kept on file and made available on request.

For property, comparable sales, the property’s condition and relevant lease information may help explain the value. Simply carrying forward last year’s figure does not explain why it remains appropriate.

For example, where a fund owns commercial premises, a brief estimate with no explanation gives the auditor little basis for assessing the result. Evidence relating to comparable properties, lease terms and material changes to the premises makes the valuation easier to assess.

An independent valuation is not automatically required for every asset every year, but the nature of the asset and the circumstances may warrant specialist input. The underlying requirement is a fair and reasonable process supported by objective evidence.

If auditors are not provided with sufficient and appropriate evidence supporting an asset’s market value, they must consider modifying the independent auditor’s report. They must also lodge an auditor contravention report where the reporting criteria are met. These reporting outcomes can lead to further regulatory scrutiny.

A modified audit report and an auditor contravention report are different things. Where valuation evidence is insufficient, the auditor considers the effect on the independent auditor’s report and whether the criteria for reporting a contravention to the ATO are met. Missing evidence does not automatically mean every issue is reported in the same way. Discussing gaps early gives trustees time to locate supporting records before the audit is finalised.

Illegal early access

The ATO continues to target trustees who access super before meeting a condition of release, especially newly established funds that receive rollovers and then fail to lodge their first annual return.

Bank data can be used to test whether money has been withdrawn improperly. Consequences may include increased audit scrutiny, additional tax, penalties, interest and trustee disqualification.

Managing your own fund does not change the rules about when super can be accessed. Generally, benefits become accessible when a member reaches preservation age and retires, or turns 65, even if still working. Limited early-release pathways have specific eligibility requirements.

For example, transferring fund money to a personal account to pay household debts before satisfying a condition of release can amount to illegal early access. Describing it as a temporary withdrawal, or intending to replace the money, does not remove the problem.

The ATO states that illegally accessed amounts can be included in the member’s taxable income even if returned to the fund. Trustees should retain evidence supporting legitimate benefit payments and obtain professional advice promptly if a questionable withdrawal has occurred.

Non-arm’s length income

Non-arm’s length dealings remain a compliance concern because they can undermine super’s concessional tax treatment. Arrangements requiring careful review include non-arm’s length expenditure, intra-group lending and guarantees, related-party valuations, private company dividends and trust distributions received by funds.

Incorrect claims for exempt current pension income are a related but distinct tax-compliance issue.

If your SMSF is required to transact with related parties at any point in time, do so on arm’s-length terms. The terms of any such arrangement must be entered into and then maintained on an arm’s-length basis.

In plain English, arm’s-length dealings are commercial dealings that do not give the fund, or any other person or entity, an artificial advantage because of the relationship between the parties.

The issue is not limited to unusually high income. Paying less than a commercial amount or paying nothing for an expense that would ordinarily be incurred can also bring the non-arm’s length expenditure rules into consideration.

Related-party involvement does not automatically establish a breach, but it does make the substance and documentation of the arrangement especially important.

For example, acquiring an investment under a non-commercial arrangement for less than market value can raise concerns about the income later generated by that asset. Similarly, professional services supplied to the fund at a non-commercial price may require review.

A written agreement alone is not enough if the parties behave differently in practice. Contracts, invoices, valuation evidence and payment records should tell a consistent story about the terms actually applied.

Ownership and existence of fund assets

Another area of compliance focus relates to the existence and ownership of fund assets, with the ATO highlighting inadequate trustee evidence as a continuing problem.

SMSF records must establish that each asset is held for the fund and identify its legal owner. Ordinarily, this is the individual trustees or corporate trustee acting for the SMSF.

Auditors need to obtain both sufficient and appropriate evidence of ownership. A trustee assertion alone is not enough. Where there is no legal impediment to correctly show the legal owner on an asset, then the ATO expects the correct owner to be listed.

Ownership and existence are separate issues. Ownership evidence establishes that an asset is held for the fund; existence evidence supports that the asset was actually held at the relevant date.

Depending on the investment, useful records may include title searches, bank statements, share or unit registers, purchase and settlement documents, and confirmations from investment providers. A payment from the fund’s bank account may help trace an acquisition but does not necessarily resolve an incorrectly recorded owner.

Where possible, assets should be recorded in the names of the individual trustees or corporate trustee ‘as trustee for’ the SMSF and kept separate from personal and business assets.

Where state or territory rules prevent the fund’s name or trust relationship appearing on a title, other legally appropriate evidence may be needed to establish fund ownership. In some situations, this may include an acknowledgement of trust or a declaration of trust, but seek relevant advice from a legal professional first.

Trustee changes can also create documentation gaps. When an individual trustee joins or leaves, asset ownership documents need to be updated and the change recorded. A change of directors of an unchanged corporate trustee does not, by itself, require the registered owner to change. Checking these details when changes occur is more effective than trying to reconstruct the fund’s ownership history at audit time.

The bottom line

Ultimately, any ATO release around focus areas acts as a reminder that good compliance is an ongoing process, not a once-a-year exercise. Clear records and timely professional input make it easier for trustees to demonstrate that the fund’s transactions and reporting are appropriate.

SMSF trustees need to be actively engaged in managing their fund. They do not need to be super experts, but they must understand their responsibilities and recognise when professional advice is needed.

Engaging an accountant, administrator or auditor provides support but does not transfer the trustees’ responsibility for running the fund and making decisions in members’ best financial interests.