SMSFs should value being within ATO jurisdiction

Mike Taylor

Managing Editor and Publisher

10 July 2026

ANALYSIS

The SMSF Association should be grateful that the sector remains regulated by the Australian Taxation Office (ATO) and for the past two decades not been lumped in with the larger funds under the regulatory oversight of the Australian Prudential Regulation Authority (APRA).

There were good reasons why the Howard Government decided to transfer the regulation of SMSFs out of APRA and to the ATO, not least a cost and resourcing load which could not be carried by a regulatory agency such as APRA. The ATO therefore became responsible for SMSFs in the 1999-2000 financial year.

In its first audit of the ATO’s handling of the SMSF sector in 2007, the Australian National Audit Office (ANAO) reflected that “the Tax Office inherited responsibility for an unfamiliar regulatory role covering a sector of the superannuation industry that was at the time suspected of having high levels of non-compliance”.

The SMSF sector at that time consisted of approximately 187,000 funds, which were growing at a rate of 470 funds each week, “but which had not received close supervision by their previous regulators”.

Five years later, a further ANAO audit noted that the SMSF sector had grown to become the largest by number of funds and held 30% of all superannuation at $407.6 billion with 442,528 SMSFs and 841,283 members.

That audit was broadly positive for the ATO, albeit that it was focused on the agency’s interpretative assistance framework.

The ANAO last September flagged that it would be kicking off a further audit of the ATO’s handling of SMSFs this year and, ahead of the exercise, the SMSF Association is urging that it look at whether the regulatory boundaries are appropriate.

Irrespective of the direction being encouraged by the SMSF Association, the ANAO has said it will conduct the audit around the following criteria:

• Does the ATO effectively manage risks associated with the regulation of SMSFs?
• Does the ATO ensure SMSF compliance, and is noncompliance effectively monitored and reported?
• Does the ATO effectively investigate and sanction SMSFs that are not compliant with their obligations?

On the available documentary and anecdotal evidence, the ANAO will likely deliver a somewhat qualified but broadly positive report given that the ATO, working with the Australian Securities and Investments Commisision, has seen the sanctioning of dozens of SMSF auditors, actions against illegal early super release schemes and the imposition of administrative penalties.

Commenting on the upcoming ANAO audit, the SMSF Association chief executive, Peter Burgess noted “Since the ANAO’s previous SMSF audits in 2007, the sector has grown substantially, the regulatory environment has become more complex, and the ATO’s role has evolved from a largely educative approach to a more active regulatory model”.

“That makes this an important opportunity to assess whether the ATO’s approach remains appropriately risk-based, proportionate and clearly anchored to its statutory role,” he said.

Burgess says the review should not be viewed as a critique of SMSFs, but as an opportunity to test whether the regulatory framework is operating efficiently, consistently and within the proper boundaries of the ATO’s role.

He says the audit should examine whether the ATO’s regulatory expectations have remained within what is necessary to administer the law.

“The vast majority of SMSF trustees seek to comply with their obligations. The challenge is to identify and respond to genuine misconduct without imposing unnecessary delays, uncertainty or administrative burden on compliant funds,” he says.

The SMSF Association believes the audit should closely consider the ATO’s approach to SMSF establishments.

“Getting the balance right at establishment is critical.”

“Front-end controls have an important role to play in addressing inappropriate SMSF establishments and illegal early release schemes. But those controls must be risk-based and administered efficiently so legitimate trustees are not caught in unnecessary delays.”

The Association says the audit should also consider the role of SMSF auditors within the regulatory framework, including whether ATO expectations remain clear, proportionate and appropriately targeted.

“SMSF auditors play a critical role in the integrity of the sector,” Burgess says.

“It is important that the regulatory settings support high-quality audit work without imposing expectations that are unclear, duplicative or disproportionate.”

Burgess says the ATO’s unique dual role as both the regulator of SMSFs and the administrator of Australia’s tax and superannuation laws should also be reflected in timely, practical and authoritative guidance.

“Where tax and superannuation obligations intersect, trustees and the industry need clear, accessible and timely guidance,” he says.

“Too often, certainty is sought through non-binding SIS Act specific advice or lengthy private ruling processes. These mechanisms have their place, but they are not always efficient ways of giving the broader sector the guidance it needs.”