The ATO has used the courts to penalise an SMSF trustee who failed to lodge annual returns with an administration provider, noting this was a warning not to be complacent about outstanding documents.
Heffron head of education and content Lyn Formica said the legal action undertaken by the ATO was against a South Australian trustee who had failed to lodge returns for three years and was ordered to appear in court over the matter under a power not previously used by the regulator.
Speaking at the Heffron Super Intensive Day 2026 in Sydney recently, Formica noted the ATO had the option of using court-ordered civil penalties, as well as administrative penalties, to enforce compliance with lodgement deadlines, but had recently chosen to prosecute a trustee for failing to lodge their fund’s annual returns.
“This is not something new, as in a new option available to the ATO, it has always been there. It is part of the Tax Administration Act that you can be prosecuted if you don’t lodge returns, whether it’s as an individual or an SMSF, and is action that we are starting to see the ATO call upon,” she explained.
“Prosecution action means you get a letter that says ‘appear in the Magistrates Court on this date’ because of the charge of failing to lodge a return and the consequences of being found guilty of that charge is that you’ve got a criminal record.”
She indicated the most recent use of this action was against the South Australian trustee who failed to lodge SMSF Annual Returns for the 2021, 2022 and 2023 financial years, received a $3981 fine and a criminal conviction, despite his accountant stating in court it was his fault the returns were late.
The matter was appealed in the South Australian Supreme Court, which denied the appeal and reiterated it was the trustee’s responsibility to lodge returns on time.
Formica noted while the criminal conviction was not for a dishonesty offence, and thus did not disqualify someone from acting as the trustee of an SMSF, it could impact those in public positions, as well as those who work for or interact with government authorities.
She added given the increasing number of funds that fail to lodge on time and the ATO’s ongoing concern around this matter, its compliance warnings should be taken seriously.
“People have become complacent around the orange and red warning letters and are not so hyped about what the consequences are,” she recognised.
“This case is a message that if you get a red letter, pay attention to it and make sure you get in contact with the ATO.”
The ATO will be sharing its insights into sector compliance at the SMSF Trustee Empowerment Day 2026. Please click here to register for the event.