New SMSFs that were granted an ABN before the end of the 2019 financial year but had no assets in their fund could find themselves caught between a rock and a hard place with the looming annual return deadline, given the administrative difficulties this will cause with the ATO’s systems, according to Heffron.
In a recent blog post, the SMSF administrator’s head of technical and education services, Lyn Formica, said while new SMSFs were technically not supposed to be granted an ABN until they had assets in their fund, in reality this was not always the case.
“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,” Ms Formica said.
“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.”
This could cause challenges for funds in this position, as they were obliged to complete a return by the new SMSF deadline of 28 February, but the ATO was not able to accept a return from a fund with no assets in it.
“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,” Ms Formica said.
“Similarly, auditors would generally not be willing to audit a fund with no assets or transactions.”
One option for funds in this position was to request a Return Not Necessary form by 28 February, which could enable them to defer lodgement of an annual return until 28 February 2021 providing they met strict criteria.
Ms Formica said: “For funds registered in 2018–19, the fund must not have had any assets in the period to 30 June 2019; [it] must not have received contributions or rollovers in 2018–19; [it] must now have assets, e.g. it received a contribution or rollover post–30 June 2019; [it must] provide documentary evidence of the date it first held assets and commenced operating, e.g. the fund’s first bank statement; and the trustee [must] confirm it will be lodging returns in the future.”
If these criteria were not able to be met, the SMSF could also temporarily cancel its ABN registration and re-apply in the future when it began to hold assets, she added.
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