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This commentary is written by Vanguard Principal, Corporate Affairs & Market Development Robin Bowerman. The title is Two hats for the ATO

It was first published on Monday 30 July 2012

And is read by Michael Mullins

Please remember that advice in this podcast represents a general view. It is recommended that you seek specific financial advice, before making investment decisions.

The tax office has a dual role when it comes to self-managed super funds (SMSFs). It is both tax collector and regulator of self-managed super.

One of the occasions when this dual role is highlighted is when the ATO releases its annual compliance program for the financial year ahead.

As made clear in the recently-published 2012-13 compliance program, the ATO is more intensely scrutinising the affairs of SMSFs over the next 12 months - in its self-managed super regulator and tax-collector roles.

A key message for SMSF trustees is to ensure that their funds are compliant with both tax and superannuation law.

The Superannuation & Financial Services Bulletin, published by Thomson Reuters, provides a valuable overview of the ATO compliance program in regards to SMSFs, emphasising that the tax office is taking a 'greater compliance' focus on these funds.

As discussed in the latest compliance program, the ATO promises to look closely at:

1  The behaviour of new SMSF trustees including their ability to operate an SMSF.

2  Illegal schemes designed for SMSF members to gain early access to their super. As part of this compliance, the tax office is trying to detect SMSFs that are setup as part of an attempt to gain early access to super.

3  Non-arm's length transactions between an SMSF and related parties (such as members). Self-managed funds are required to invest on a commercial, arm's length basis. Therefore, the purchase or sale price of fund assets involving related parties must be at market value.

4  Irregularities involving tax-exempt pension income. (Fund assets backing the payment of a superannuation pension are exempt from tax.) As Smart Investing will discuss during the next week, this pension income represents a big tax break for SMSFs that some funds incorrectly claim. For instance, SMSFs must revalue fund assets at market value before a pension commences.

5  Late lodgements of annual returns, and breaches of superannuation law reported by approved auditors.

The ATO's compliance program can serve not only as a warning of where the tax office is looking but also as a reminder of areas where your self-managed fund could possible improve.

And that concludes the column

Two hats for the ATO

from Robin Bowerman,  Principal, Corporate Affairs & Market Development at index fund manager Vanguard Investments Australia

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Please remember that advice in this podcast represents a general view. It is recommended that you seek specific financial advice, before making investment decisions.