ATO SMSF supervisory levy: Cost and guidelines

When you set up an SMSF there are a range of fees and charges associated; some are one-off while others are recurring.

The supervisory levy is an annual payment all SMSFs must pay to the Australian Taxation Office (ATO). It’s a small cost in the greater scheme of things, but one that can be costly to overlook.

How much is the ATO levy?

Currently, the annual SMSF levy is $259. It has remained unchanged at this level since the 2014–15 financial year.

It’s important to note that the levy must be paid in advance for the following financial year. Prior to July 2013, the levy was payable in arrears (for the current financial year).

The advance payment system means that newly registered SMSFs pay double the annual levy in their first year of operation. That is, your fund must pay $518, which is the $259 levy for the financial year in which it registers, plus $259 for the following financial year. This amount is payable even if your fund was only registered part-way through its first financial year.

An SMSF is classed as being legally established (and therefore must be registered with the ATO) in the year in which it first has assets set aside for its members. That is, when your fund first receives fund member contributions and/or their asset rollovers.

The upside of the advance payment system is that your SMSF won’t have to pay the annual ATO levy in the year it’s wound up. That’s because it will have paid for that year already.

In summary, an SMSF’s levy depends on the following factors:

• Whether it is an existing fund
• Whether it has been newly registered in the current financial year
• Whether it has been wound up in the current financial year.

According to the latest ATO statistics, there are more than 610,000 SMSFs currently operating in Australia. That means the annual levy of $259 raises around $158 million a year for the ATO.

How and when is it charged?

You need to pay the levy with your fund’s annual tax return. SMSF trustees are responsible for lodging an annual return on behalf of their fund as part of their compliance obligations.

The levy is added to the tax payable by your SMSF for member contributions and fund earnings (or deducted from any tax refund your SMSF may be entitled to receive). The levy is payable even if your SMSF has no tax payable on member contributions or fund earnings.

The due date for an SMSF’s annual tax return is generally 28 February the following financial year if you prepare the return yourself as a fund trustee. However, if you use the services of a tax agent, this date may vary.

Failure to lodge your SMSF annual return by the due date can be costly. The ATO may impose penalties on fund trustees and/or remove the fund’s tax concessions.

SMSFs, like all super funds in Australia, are eligible for attractive tax concessions that are worth holding onto. Member tax-deductible contributions and fund earnings in compliant SMSFs are taxed at the concessional super rate of 15% instead of your marginal tax rate, up to certain contributions limits. 

Why is the levy charged?

Money raised by the levy helps the ATO to:

• Educate SMSF members/trustees about their legal compliance obligations
• Regulate the sector. SMSFs must be audited each year by an ASIC-registered auditor, who is then required to report any non-compliance issues to the ATO. If your fund is deemed non-compliant, the ATO can impose a wide range of financial and non-financial penalties.

Is the ATO SMSF supervisory levy tax deductible?

Yes, the levy is fully tax deductible, as are the costs in preparing and lodging your SMSF annual return.