Retirement income entities: Late lodgment of election to be regulated.

Will a Self Managed Superannuation Fund (SMSF), established before the beginning of the 1994-95 year of income, which lodges an election to be regulated under section 19 of the Superannuation Industry (Supervision) Act 1993 (SISA) on or after 28 July 1994 be taken to be a regulated superannuation fund at all times before the trustee lodged the election?

Yes, provided an election is made in accordance with section 19 of the SISA and the trustee complies with the requirements set out in subsection 50(1) of the SISA the SMSF will be deemed to have been regulated at all times under the SISA during the pre-lodgment period, beginning at the beginning of the fund's 1994-95 year of income and ending at the time the election is lodged.

The superannuation fund was established before the introduction of the SISA.

The trustees wrongly believed that all administrative obligations, including lodgment of the notice of election to be regulated under the SISA, had been completed by the relevant accountant at the time.

Upon realisation of the error, the trustees of the SMSF lodged a late election for the fund to be regulated under section 19 of the SISA.

The trustees state that all members were notified of the delay in lodging the election and the reasons for the delay.

A statement signed by the trustees states that the superannuation fund complied with the SISA transitional provisions and that no contraventions of the SISA have occurred during the pre-lodgment period.

A schedule of investments from the 1995-96 year of income and later years was provided, indicating amounts invested in various asset classes.

Financial statements were supplied for the years prior to the 1995-96 year of income.

Subsection 50(1) of the SISA allows a fund, which has lodged an election (after 28 July 1994) to be regulated under section 19 of the SISA, to be considered (subject to certain conditions) a regulated superannuation fund at all times during the pre-lodgment period. The pre-lodgment period begins at the beginning of the 1994-95 year of income and ends on the date of lodgment of the election.

The trustees must satisfy the Regulator that subsection 50(1) of the SISA should apply.

Subsection 50(1) of the SISA requires that, under the Superannuation Industry (Supervision) Regulations 1994, the superannuation fund is treated as if it had satisfied the transitional superannuation fund conditions at all times during the pre-lodgment period.

Guidance as to whether subsection 50(1) of the SISA should apply is provided at paragraphs 54 to 58 in Australian Prudential Regulation Authority (APRA) Circular III.A.1. Although the circular is directed to trustees of APRA regulated funds, the guidelines have been adopted by the ATO as the Regulator of SMSFs. The circular states that the request, for a late election to be considered under subsection 50(1) of the SISA, should contain a statement signed by at least one of the trustees covering: • the reason for the late election; • confirmation that superannuation fund members were properly notified about the delay in lodging the election; • a declaration that the superannuation fund complied with the transitional superannuation fund conditions since the commencement of its 1994/95 year of income; and • details of the superannuation fund's investments during that period.

The trustees supplied the above details in respect of the superannuation fund. All members were notified as to the delay in the late lodgment and the reason for the late election. The trustees have supplied a signed declaration of compliance with the transitional provisions and a schedule of investments for the 1995-96 year of income and later years. The schedule lists investments which are consistent with the usual investments and movement in capital growth of a superannuation fund over this period.

The information provided by the trustees of the superannuation fund was in accordance with subsection 50(1) of the SISA. Therefore, the SMSF will be treated as being regulated at all times during the pre-lodgment period.