My clients applied to register their new SMSF and get an ABN a month ago but it still hasn’t come through. What is the hold up?
When a new SMSF is established, the fund has 60 days to register the SMSF with the ATO by applying for an Australian Business Number (ABN) and Tax File Number (TFN), and electing to be regulated by them.
Sometimes the application is processed automatically and an ABN issued straight away. However, there are times when the application is delayed. We understand the ATO has increased their scrutiny of individuals wanting to establish an SMSF. This in itself has led to longer processing times, and the Coronavirus crisis has stretched resources further. In the past the registration process could take up to 30 business days, but in more recent times we have found that this has extended out to as much as 45 days.
Processing delays may be experienced where:
- all the required set up steps have not been undertaken (for example, the trustee was unable to indicate that the fund now has assets – ie that it has been legally established),
- the name of the new fund has been used previously by another SMSF (there are no rules against this but it can delay the registration process),
- the ATO can’t confirm the identity of all of the SMSF’s associates (ie trustees and members), or
- one or more of the trustees are not able to run an SMSF (ie they are disqualified persons).
For every new fund, the ATO will review the trustees (and other entities that they have controlled) taking the following factors into consideration:
- history of insolvency
- crimes related to dishonesty
- previous SMSF history
- personal lodgment and payment history (trustees with a poor personal tax lodgment history may find the SMSF is given an early lodgment due date as a way of “proving” themselves to the ATO)
- super balance and income (eg a member having a very low super balance may be an indicator of someone intending to try to access their super illegally and the ATO may simply need to be told that they member is intending to make large non-concessional contributions)
- information about identities that have been used fraudulently.
Where they are not sure of the fund’s eligibility based solely on the answers in the application form, the ATO withhold registration while they investigate.
During this time, the fund will appear on Super Fund Lookup (SFLU) as “Pending” or “Regulation details withheld”.
Members are unable to transfer money from another super fund into their new SMSF until the investigation and the registration is complete.
Once a registration is successful, the fund will appear on SFLU as “Registered”. New SMSFs with the status of “Registered” are able to accept transfers, rollovers and contributions. However employers may wish to obtain a written statement from the SMSF trustee that it is a resident regulated SMSF to ensure a contribution to the fund qualifies for superannuation guarantee purposes until the Notice of Compliance issues and the fund’s status changes to “Complying”.
For the SMSFs we administer, we work closely with the ATO to resolve these issues by escalating the application with their case workers. Sometimes the delays, however, are outside our control. Ensuring your clients understand the implications of having outstanding ATO lodgment and payment history (for example) could help with setting client expectations upfront.