Running a Self-Managed Super Fund (SMSF) comes with significant responsibilities, including strict compliance with superannuation laws. One key compliance requirement is the Auditor Contravention Report (ACR), which SMSF auditors must lodge if they identify serious breaches during an audit.
What is an ACR
An ACR is a formal report submitted by an SMSF auditor to the Australian Taxation Office (ATO) when they identify breaches of the:
- Superannuation Industry (Supervision) Act 1993 (SISA)
- Superannuation Industry (Supervision) Regulations 1994 (SISR)
Key Points About ACRs:
- Must be lodged within 28 days of audit completion if a reportable contravention is found.
- Not all breaches require reporting —only those meeting the ATO’s specific criteria.
- Repeated or severe contraventions can lead to penalties, fund non-compliance, or trustee disqualification.
Most Common SMSF Contraventions
Many SMSF breaches stem from misunderstanding the rules. Here are the top compliance pitfalls:
- Loans to Members or Relatives – SMSFs cannot lend money to members or their relatives.
- Exceeding the 5% In-House Asset Limit – Investments in related parties must stay below 5% of the fund’s total assets.
- Mixing SMSF and Personal/Business Assets – Fund assets must be kept separate to avoid compliance issues.
- Improper Borrowing Arrangements – SMSFs can only borrow under limited conditions (e.g., limited recourse borrowing arrangements).
- Non-Compliant Investment Strategy – Funds must have (and regularly review) a documented investment strategy.
- Breaching the Sole Purpose Test – All investments must solely support retirement benefits—no personal gain.
How to Avoid SMSF Compliance Breaches:
- Know the Rules—Stay updated on SISA/SISR and ATO guidelines.
- Keep Assets Separate—Never mix SMSF and personal/business assets.
- Monitor In-House Assets—Ensure they stay under the 5% limit.
- No Member Loans—Avoid any financial assistance to members or relatives.
- Maintain a Strong Investment Strategy—Review it annually (or when circumstances change).
- Be Cautious with Borrowing—only use permitted borrowing structures.
- Get Professional Advice—An SMSF specialist or auditor can help navigate complex rules.
- Conduct Regular Audits—Early detection of issues prevents bigger problems.
Staying compliant with SMSF regulations is critical to avoiding penalties and protecting your retirement savings. By understanding ACRs, recognizing common breaches, and following best practices, you can minimize risks and keep your fund in good standing.
Need help with your SMSF compliance? Consult a professional advisor or auditor to ensure you’re on the right track.
Credits
Sundaram Shanmugam
Smart SMSF Team
