At the SMSF Association National Conference in Adelaide on 18 February 2026, the ATO’s Deputy Commissioner Ben Kelly outlined where the regulator will be focusing its attention this year. Kelly co-presented with Leah Sciacca, Senior Executive Leader from ASIC, at the Adelaide Convention Centre - the two agencies sharing a joint regulatory role in the SMSF sector.
The message was direct: lodgement compliance, prohibited loans, and data matching are front and centre. For trustees running well-managed funds, the content was reassuring. For those with outstanding obligations or loose governance habits, it was a clear warning.
Here is what was announced and what it means for your fund.
Key Takeaways
- As at 31 December 2025, approximately 93,000 SMSFs have overdue annual return lodgements, including 20,000 that have never lodged a single return.
- Failure to Lodge (FTL) penalties accrue at $330 per 28-day period, up to a maximum of $1,650 per return - and cannot be paid from the fund.
- Prohibited loans in SMSFs reached $398 million in 2022-23. This is a separate category from illegal early access ($252 million). The ATO treats both as serious contraventions.
- The ATO’s data matching across banks, share registries, and land titles offices is expanding. Irregularities that were once hard to detect are now increasingly visible.
- Trustees who come forward proactively are treated materially differently to those the ATO identifies through its own compliance activity.
- The vast majority of Australia’s 600,000+ SMSFs continue to operate compliantly. The ATO’s enforcement focus is targeted at a specific subset of non-compliant funds.
Contents
- Priority 1: Overdue Annual Returns
- Priority 2: Prohibited Loans and Illegal Early Access
- Priority 3: Data Matching and Asset Valuations
- What the ATO Wants Trustees to Do Before 30 June 2026
- What This Means for Compliant Trustees
- Quick Action Checklist
- Frequently Asked Questions
Priority 1: Overdue Annual Returns
As at 31 December 2025, approximately 93,000 SMSFs have one or more outstanding lodgement obligations. Of those, 20,000 have never lodged a single return since registering their fund.
The ATO views lodgement as the foundation of everything else. It is how the regulator assesses whether a fund is operating within the rules, and how trustees demonstrate they are meeting their legal obligations. When a fund falls behind on lodgement, several consequences follow automatically.
What happens when lodgement falls behind
Status on Super Fund Lookup changes. When an SMSF annual return is more than two weeks overdue, the ATO changes the fund’s status on Super Fund Lookup to “regulation details removed”. This prevents the fund from receiving rollovers and employer contributions until the outstanding returns are lodged. Status is restored on the first business day of the following month after lodgement.
Failure to Lodge penalties apply. FTL penalties accrue at one penalty unit ($330) for each period of 28 days - or part thereof - that the return remains overdue, up to a maximum of five penalty units. That is a maximum of $1,650 per outstanding return. These penalties cannot be paid from the fund - they are personal liabilities of the trustees. For a fund with two individual trustees, penalties are applied to each trustee separately, meaning the combined liability can be significantly higher. A corporate trustee bears a single penalty.
Concessional tax treatment is at risk. Persistent non-lodgement can ultimately result in the fund being classified as non-compliant. A non-compliant fund loses its concessional 15% tax rate - income is taxed at 45% instead. In serious cases, trustees can be disqualified, which is recorded on the public record.
Who needs to act
As of April 2026, SMSFs should have lodged their 2024-25 annual return (or have it in progress with a tax agent under an extended deadline). If you have not lodged your 2024-25 return, or have returns outstanding from earlier years, this is your first call to your accountant. Do not wait for the ATO to contact you first.
For guidance on the annual return process and what auditors check, see our SMSF Audit Guide. For the ATO’s Lodge SMSF annual returns page, the requirements and consequences are set out in full.
Priority 2: Prohibited Loans and Illegal Early Access
The ATO distinguishes between two separate but related categories of illegal fund access, both of which are compliance priorities.
Illegal early access is where a member withdraws super before meeting a condition of release - without any pretence of a loan. The ATO’s estimate for 2022-23 is approximately $252 million.
Prohibited loans are where an SMSF lends money to a member, a related party, or uses fund assets to benefit a member before a condition of release is met - often structured as an arrangement intended to be repaid. The ATO’s estimate for prohibited loans in 2022-23 is $398 million, up from $231 million the prior year.
Kelly was direct on one point: structuring an arrangement as a loan does not make it less serious. A prohibited loan is a breach of the SIS Act at the point the money leaves the fund, regardless of whether documentation exists or the money is later repaid. The ATO has observed advisers suggesting that framing early access as a loan reduces the risk of enforcement action. The ATO’s position is the opposite.
The most common scenario is a trustee using fund money to support a business they own or to cover personal cash flow shortfalls, with the intention of paying it back later. This fails the fund’s sole purpose test - the requirement that an SMSF be maintained solely for the purpose of providing retirement benefits to its members.
The consequences include additional tax on the amount accessed, administrative penalties of up to $19,800 per contravention, and in serious cases, disqualification as a trustee. That disqualification is recorded publicly.
Priority 3: Data Matching and Asset Valuations
The ATO continues to expand its real-time data matching capabilities across the SMSF sector. This includes cross-referencing fund transaction data with information from banks, share registries, land title offices, and the ATO’s broader tax systems.
Irregularities that might once have gone unnoticed are now increasingly visible. The specific areas the ATO is watching:
Asset valuations that appear inconsistent with comparable market sales or industry benchmarks. For trustees holding property in particular, the ATO expects objective, supportable evidence of market value at 30 June each year - not estimates, not last year’s figures carried forward, and not valuations that conveniently align with a preferred outcome.
Related-party transactions that do not appear arm’s length. Any dealing between the fund and a member, associated business, or related entity is examined against whether it was done on terms that would apply between independent parties. For more on how trustee obligations around related-party transactions work, see our SMSF Trustee Obligations guide.
Contribution timing that does not match bank records. The ATO’s data matching can identify discrepancies between what is reported in the annual return and what the fund’s bank account shows. Under Payday Super from 1 July 2026, this scrutiny will intensify as the timing of employer contributions becomes a compliance issue in its own right. See our Payday Super guide for SMSF trustees for what to prepare.
Division 296 and the valuations connection
For members with a total super balance approaching or above $3 million, accurate 30 June valuations take on additional importance from 2026-27. Division 296 tax calculations - which apply from 1 July 2026 - use fund earnings data that relies directly on the accuracy of year-end asset valuations.
Additionally, SMSF trustees have a once-off option to reset the cost base of all fund assets to their market value as at 30 June 2026 for Division 296 purposes. This election is irrevocable, applies to all assets in the fund, and must be made by the due date for lodging the 2026-27 annual return. For trustees considering this election, the 30 June 2026 valuations are the foundation - they need to be accurate and objectively supportable. For a full explanation, see our Division 296 CGT cost base reset guide.
Accurate valuations also matter under the 2026 budget CGT proposals, because the relative tax outcome for assets held inside or outside super depends heavily on how asset growth compares with inflation. See our post-budget explainer on SMSF budget 2026 CGT, negative gearing and trust changes.
What the ATO Wants Trustees to Do Before 30 June 2026
Based on Kelly’s address, the ATO is encouraging three specific actions before the end of this financial year.
1. Come forward on lodgement issues - proactively
Kelly was explicit: the approach taken with trustees who come forward proactively is materially different to the approach taken with those the ATO identifies through its own compliance activity. If your fund has overdue returns, contact your accountant now and get them lodged before the ATO initiates contact.
2. Review any related-party transactions
Any movement of money between the SMSF and a member, spouse, business, or associated entity that was not a permitted benefit payment is an area the ATO is actively examining. If there is any uncertainty about whether a past transaction was permitted, Kelly encouraged trustees to seek advice and consider voluntary disclosure rather than waiting for the ATO to raise it.
3. Get current, supportable asset valuations in place
Ensure that all non-listed assets - particularly property - have current market valuations backed by objective evidence. This matters for the annual return, for audit, and for any Division 296 cost base election decision. Your fund’s investment strategy should also reflect current asset values and allocation weightings.
What This Means for Compliant Trustees
Kelly’s remarks were not designed to alarm trustees who are running their funds correctly. The ATO’s data shows the vast majority of Australia’s 600,000+ SMSFs are compliant - the enforcement focus is targeted at a specific subset of funds displaying particular patterns of behaviour.
But the underlying message is worth taking seriously regardless of where your fund sits. Governance is not a once-a-year box-ticking exercise. It is an ongoing responsibility. The ATO’s position in 2026 is clear: compliant trustees have nothing to fear. Non-compliant trustees should expect to be found.
Quick Action Checklist
Work through these if you have any concerns about your fund’s compliance position.
- Check your lodgement status. Confirm with your accountant that your 2024-25 annual return is lodged or in progress. Address any prior-year outstanding returns immediately.
- Verify your Super Fund Lookup status. Search your fund at superfundlookup.gov.au and confirm the status shows “complying.”
- Review any related-party transactions. If money has moved between the fund and a member, business, or associated entity in a way that was not a permitted benefit payment, seek advice now.
- Obtain current valuations for all non-listed assets. Particularly for property held in the fund ahead of 30 June 2026 - these are needed for the annual return, the audit, and potentially the Division 296 cost base election.
- If your TSB is above or approaching $3 million, discuss the Division 296 cost base election with your SMSF specialist before 30 June 2026. The decision is irrevocable and has a hard deadline.
- If you have concerns, use the ATO’s Early Engagement and Voluntary Disclosure service before the ATO makes contact. The difference in treatment is material.
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Frequently Asked Questions
What does “regulation details removed” on Super Fund Lookup actually mean?
It means the ATO has changed your fund’s compliance status because annual returns are more than two weeks overdue. In practice, this prevents the fund from receiving employer super contributions and prevents rollovers in or out. Employers who check Super Fund Lookup before paying SG - as many do - may be unable to pay contributions to the fund while this status applies. The status is restored on the first business day of the following month after the outstanding returns are lodged.
Can FTL penalties be paid from the SMSF?
No. Failure to Lodge penalties are personal liabilities of the trustees - they cannot be paid from the fund. For a fund with two individual trustees, each trustee is personally liable for the penalty. At the current rate of $330 per penalty unit (maximum 5 units), each trustee could face up to $1,650 per outstanding return. For a fund with two trustees and three overdue returns, the combined personal liability could reach $9,900.
Is there a difference between a prohibited loan and illegal early access?
Yes, and both are ATO enforcement priorities. Illegal early access is where a member withdraws super before meeting a condition of release. A prohibited loan is where the SMSF formally lends money to a member or related party - often with a loan agreement in place. The ATO is explicit: having a loan structure does not reduce the seriousness of the breach. Both are contraventions of the SIS Act. The $398 million prohibited loan estimate and the $252 million illegal early access estimate from 2022-23 are separate figures.
What asset valuations does the ATO require?
For non-listed assets - particularly direct property - the ATO expects market value at 30 June each year, based on objective, supportable evidence. For residential and commercial property, this typically means a formal valuation from a qualified valuer, or at minimum a documented analysis of comparable sales. Estimates, rolled-forward prior-year figures, or valuations that appear designed to achieve a particular outcome will draw scrutiny. Your SMSF auditor is required to check that asset values in the annual return are supportable.
What is the consequence of a fund being deemed non-compliant?
A non-compliant fund loses its concessional tax treatment. Instead of paying 15% on fund income, the fund is taxed at 45% - the highest marginal rate. This applies to the entire assessable income of the fund, not just the income related to the breach. Non-compliant status can also trigger further enforcement action, asset freezing orders, and trustee disqualification. It is the most serious outcome in the ATO’s compliance toolkit and is reserved for serious or repeated contraventions.
Where can I read the full ATO speech from the conference?
The full text of Ben Kelly’s address is available on the ATO website: Speech to SMSF Association National Conference. A summary of the key highlights is also available at the ATO SMSF newsroom.
Disclaimer: This article is for educational purposes only and does not constitute financial advice. Always consult a licensed financial adviser or SMSF specialist before making decisions about your fund.