Lodging returns for newly established SMSFs

Annual Returns for SMSFs established in 2018/19 must be lodged by 28 February 2020. If the fund had never operated and had no assets at 30 June 2019, must it still lodge a return?

The ATO will not grant an ABN to a new SMSF unless the fund can indicate it has assets of some sort as part of the ABN registration process. This is because like any trust, an SMSF is not legally established until it has assets set aside for the benefit of members.

Despite this being the ATO policy, there continue to be situations arising where a new fund is granted an ABN before holding any assets and in fact still has no assets at the end of the financial year. Unfortunately, the ATO’s systems will not accept lodgement of an SMSF Annual Return for a fund which has no assets or closing member account balances unless the return is for the year in which the fund was wound up. Similarly, auditors would generally not be willing to audit a fund with no assets or transactions.

Funds in this situation have two choices:

1. Defer the due date for lodgement of the first return by requesting a Return Not Necessary (RNN)

RNNs are allowed for first year lodgements (and subsequent years if required) if strict criteria are met. For funds registered in 2018/19:

• the fund must not have had any assets in the period to 30 June 2019,
• the fund must not have received contributions or rollovers in 2018/19,
• the fund must now have assets (eg it received a contribution or rollover post 30 June 2019),
• the fund can provide documentary evidence of the date it first held assets and commenced operating (eg the fund’s first bank statement), and
• the trustee confirms it will be lodging returns in the future.

RNN requests should be made prior to 28 February 2020 (for funds registered in 2018/19). The first return for the fund would then not be due until 28 February 2021 (note in particular that the early lodgement date that always applies for new funds (February instead of May) will still apply next year).

Tax agents can request a RNN via the tax agent portal (select the mail option, select “superannuation” as the topic, and choose the mail subject “SMSF new registrant – Return Not Necessary request). A copy of the documentary evidence above will need to be supplied with the request.

2. Request cancellation of the fund’s ABN registration

Where a fund does not meet the criteria above to qualify for a RNN (eg the fund still does not have assets by 28 February 2020), it should cancel its ABN registration. If the fund begins to hold assets in the future, the trustee could apply to re-register the fund.

Tax agents can cancel a fund’s ABN registration via the tax agent portal (select the mail option, select “superannuation” as the topic, and choose the mail subject “SMSF cancellation of registration where a fund has not legally established”).