SMBtech’s Super SMSF Roundup: ATO And ASIC Introduce New SMSF Property Borrowing Rules, Large Balance Tax And Auditor Enforcement Actions

The self-managed super fund sector is navigating a wave of regulatory changes as the Australian Taxation Office and the Australian Securities and Investments Commission roll out new rules on property borrowing, tax on large super balances, Payday Super compliance and auditor enforcement.

The changes affect the more than 672,000 SMSFs holding an estimated $1.06 trillion in assets across Australia, touching everything from how funds can borrow to acquire property through to how auditors are monitored and disciplined.

New LRBA Property Restrictions From 10 August

New rules governing limited recourse borrowing arrangements will reshape how SMSFs can use debt to acquire property.

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June and amends LRBA provisions for self-managed super funds. The changes apply to LRBA arrangements entered into on or after 10 August 2026.

Under the new framework, an LRBA can only be used to acquire real property if the property qualifies as business real property. This effectively closes the door on new LRBA arrangements for residential investment properties held through SMSFs.

Existing LRBAs entered into before 10 August 2026 are unaffected. The same applies to the refinancing of existing LRBAs entered into before that date and to binding contracts to acquire real property exchanged before 10 August, even if the contract settles or the LRBA is entered into after that date.

Fund trustees and professionals considering entering into an LRBA can find further detail at the ATO’s Changes to limited recourse borrowing arrangements page.

Division 296 Tax On Large Super Balances Now In Effect

The Better Targeted Super Concessions legislation, known as Division 296, is now law and applies from the 2026-27 financial year onwards.

From 1 July 2026, individuals with a total super balance above the large super balance threshold – set at $3 million for 2026-27 – will be subject to Division 296 tax of an additional 15 per cent on the proportion of earnings relating to their total super balance exceeding the threshold.

Super balances above the very large super balance threshold – set at $10 million for 2026-27 – will attract an additional tax of 10 per cent on the proportion of earnings exceeding that higher threshold.

SMSFs will need to calculate the relevant super earnings for members who have a total super balance exceeding the large super balance threshold and report those earnings to the ATO.

Fund trustees should prepare for several obligations. These include reporting members’ relevant super earnings in the SMSF Annual Return from 2026-27 onwards and considering whether the fund should opt in for the CGT adjustment for Division 296 tax. That election will apply to all CGT assets held by the fund on 30 June 2026 and cannot be revoked. Members do not need to be over the large super balance threshold to opt in for this adjustment, but the election must be made by the due date of the 2026-27 SMSF Annual Return.

Division 296 Notices of Assessment for 2026-27 income are expected to issue in the latter half of 2027-28. Members may elect to release money from their fund to pay the liability.

The ATO has published guidance on how Division 296 affects individuals and how it affects SMSFs. Law companion rulings to help funds calculate their in-scope members’ relevant super earnings are currently being drafted.

Total Super Balance Calculation Changes

The way the ATO calculates an individual’s Total Super Balance for tax purposes has changed as a result of new legislation.

From 30 June 2026, an individual’s TSB will be the total of the TSB values of their Australian superannuation interests – including interests supporting death benefit super income streams in the retirement phase and notional super interests due to a family law split – plus the amount of each rollover super benefit not already included, plus outstanding limited recourse borrowing arrangement amounts, less any personal injury or structured settlement contributions paid into their super interest.

Superannuation interests in foreign funds will be excluded from TSB going forward.

TSB is used to determine eligibility for a range of super entitlements. The ATO recommends that members who are unsure how the changes will affect the value of their super interest speak to their financial adviser. Further information is available at the ATO’s Total Super Balance page.

ASIC Takes Action Against 36 SMSF Auditors

ASIC took administrative action against 36 approved SMSF auditors between January and June 2026, bringing its total actions against SMSF auditors in the 2025-26 financial year to 64. The figure represents a year-on-year increase in enforcement activity.

The actions address breaches of auditor obligations including failing to maintain independence, non-compliance with auditing and assurance standards, non-compliance with continuing professional development requirements, failing to maintain practical experience, failing to lodge annual statements and not being a fit and proper person to remain registered.

“SMSF auditors play a fundamental role in promoting confidence and instilling trust in the entire SMSF sector,” ASIC Commissioner Kate O’Rourke remarked.

“It is crucial that SMSF auditors comply with their regulatory obligations. ASIC will continue to take action where they do not meet these obligations.”

Between January and June 2026, ASIC disqualified four SMSF auditors, suspended three, imposed additional conditions on eight and cancelled the registration of 21.

Christopher Edwards, Derek Grima, Alexander Papazoglou and Bruce Rowntree were disqualified from being SMSF auditors. Disqualified auditors are placed on ASIC’s public banned and disqualified register.

Mussarut Mirza, Wenjie Jiang and Huan Yu had their registrations suspended for a period. Jiang has requested ASIC reconsider its suspension decision, which had not been determined at the time of the announcement.

Brendan Bastin, Liliya Bayazitova, Robert Florence, Sean Henbury, Ian Gath, Peter O’Keefe, Chi Truong and Diane Wills had additional conditions imposed on their registrations. Marina Chan and Wesley Hindmarsh had their registrations cancelled for failing to maintain practical experience and annual statement non-lodgement. A further 19 SMSF auditors had their registrations cancelled for failing to comply with their obligation to lodge multiple annual statements, one of which was subsequently reinstated after seeking a review of the decision.

Across the full financial year, ASIC’s 64 administrative decisions resulted in the disqualification of eight SMSF auditors, suspension of three, imposition of additional conditions on 10 and cancellation of registration for 43.

ATO Auditor Compliance Focus For 2026-27

The ATO’s own compliance program for SMSF auditors will target areas where it sees the highest risk to audit quality and regulatory outcomes.

During 2025-26, the ATO completed close to 200 reviews and audits of SMSF auditors and referred 39 to ASIC. These referrals included auditors who lacked practical experience to conduct audits and auditors who did not conduct independent or adequate audits. The ATO’s reviews identified recurring issues with audit evidence, auditor reporting and file documentation, with many files showing auditors had not obtained sufficient evidence to support the ownership, existence or market value of fund assets.

The 2026-27 compliance focus areas include market valuation reviews, examining whether auditors obtained sufficient objective audit evidence to verify compliance with regulation 8.02B. This focus will become particularly relevant for 2026-27 audits where auditors will need to check valuations of assets that may trigger a Division 296 liability for a fund member.

The program will also target high-risk auditor reviews where ATO intelligence and data indicate auditors may not be conducting independent and adequate audits, high-volume auditor reviews to check that processes and procedures can manage large workloads, auditor independence reviews and reviews of newly registered auditors. Further guidance is available at the ATO’s compliance audit of an SMSF page.

Payday Super Compliance In Year One

With Payday Super commencing on 1 July 2026, the ATO has published a compliance guide outlining how it will approach enforcement during the first year of the new regime.

Under Payday Super, employers must ensure super guarantee contributions are received by eligible employees’ super funds within seven business days after each payday. The day qualifying earnings are paid is day zero.

The ATO’s approach, set out in Practical Compliance Guideline 2026/1, centres on employer behaviour rather than isolated mistakes. The tax office will focus compliance action on employers who are not trying to make the adjustment to more frequent contributions or who are not paying super at all, while supporting those who are making genuine efforts to comply.

The ATO has established three risk zones for employer compliance. Employers assessed as low risk are those who have attempted to pay super guarantee on time and for the correct amount but where some contributions were not received by the fund on time, provided they take steps to correct the issue as soon as reasonably practicable. No further review of low-risk employers is expected.

Medium-risk employers are those who do not meet the low-risk criteria but have rectified any unpaid super guarantee within 28 days after the end of the quarter in which the qualifying earnings were paid. Compliance resources may be applied to these cases, though they are lower priority than high-risk matters.

High-risk employers are those who do not meet the criteria for low or medium risk, including situations where outstanding super guarantee amounts have not been corrected within 28 days after the end of the relevant quarter. These cases are the highest priority for compliance action.

Employers can move between risk zones during the first year depending on their behaviour over time.

If employers miss a super guarantee contribution, pay late, pay the wrong amount or pay to the wrong fund, they can lodge a voluntary disclosure statement reporting it to the ATO. Lodging such a statement is voluntary and can reduce the final super guarantee charge, particularly if lodged early. The voluntary disclosure statement for 2026-27 has been streamlined to reflect the ATO’s practical compliance approach.

Payday Super Myths Cleared Up For SMSFs

The ATO has addressed several misconceptions about how Payday Super affects self-managed super funds.

One common myth is that lodgment obligations or having a suspension on file does not affect an SMSF’s compliance status. In fact, if an SMSF’s lodgment obligations are not met or the fund has a suspension on file, it may not be treated as “complying” on the Super Fund Lookup. This can result in employers being advised through their payroll system or clearing house that they cannot contribute to the SMSF, causing payments to be missed, delayed or redirected to a default fund and leaving the employer liable for the super guarantee charge.

The ATO urges trustees to lodge their SMSF annual return by the due date and regularly check their Super Fund Lookup status.

Another myth is that the timeframe to allocate or reject payments has changed for SMSFs. In reality, SMSFs still have 28 calendar days after the end of the month in which a contribution is received to allocate or reject it. This has not changed under Payday Super.

Where an SMSF receives a super contribution from an unrelated employer, the fund needs to ensure its bank account is reachable by the New Payments Platform – which can be checked with the bank – and that the fund is registered for and continues to maintain an active electronic service address.

Penalty Unit Increase From 1 July

From 1 July 2026, the Commonwealth penalty unit amount increased from $330 to $364 for infringements that occurred on or after that date. Penalties are imposed when taxpayers fail to meet their tax obligations and are designed to encourage compliance. Penalty amounts cannot be claimed as a deduction.

Setting Up An SMSF: A Warning Against Scheme Promoters

The ATO is warning people to think carefully before setting up or rolling over to an SMSF, particularly where the motivation is a specific investment opportunity.

Some individuals are being encouraged to establish an SMSF or roll over their super to access a particular property, cryptocurrency or other investment. The ATO cautions that an SMSF is a long-term retirement structure and should support retirement goals, not just one investment opportunity.

ASIC has expanded its list of known businesses collecting personal details through online ads and forms, which can lead to people being contacted about financial products, investments or SMSF arrangements.

Warning signs include descriptions of an investment as exclusive, urgent or likely to deliver high returns, along with pressure to act quickly or move super before risks have been properly considered.

People considering an SMSF should ask themselves why they are being encouraged to set one up, whether they understand what managing an SMSF involves, whether the person or business giving advice is registered and whether they have spoken to an independent party not connected to the investment.

Suspicious arrangements can be reported using the ATO’s tip-off form or by calling 1800 060 062. Information about common schemes is available at SMSF schemes.

SMSF Bank Account And ESA Setup Issues

The ATO has flagged common problems when setting up new SMSFs, including the inability to receive employer contributions and delays when rolling over existing super. These issues are often caused by missing or incomplete setup details.

When establishing an SMSF, trustees must ensure a bank account in the fund’s name is opened and a valid Electronic Service Address is obtained and recorded. The bank account is used to manage fund operations, accept contributions, process rollovers, receive investment income, pay expenses and keep fund money separate from personal or related party assets.

Recording correct bank account details and having an ESA enables the fund to receive employer contributions via SuperStream, process rollovers and electronic transactions and meet ongoing reporting obligations. Failure to provide these details can result in rejected transactions and delays.

The ATO recommends verifying both the bank account and ESA at registration. Further information is available at Set up your SMSF bank account and Get an electronic service address.

SuperStream NPP Registers Updated

The latest versions of the SuperStream New Payments Platform Register and SuperStream NPP Deferral Register are available under User guides and supporting documents on the Contribution standard v3.0 page of the software developers website.

The SuperStream NPP Register lists super funds that accept payments via the NPP. Funds can list by emailing SuperStreamStandards@ato.gov.au with the required details.

Funds unable to receive payments via the NPP must advise the ATO as soon as possible by emailing the same address with the information required to support their deferral, as outlined in the register.

Survivors Law Closes Superannuation Loophole

The Treasury Laws Amendment (The Survivors Law) Bill 2026 received Royal Assent on 20 May 2026, closing a loophole that allowed child sexual abusers to shield assets in superannuation and deny victims and survivors compensation.

The measure will enable victims and survivors of certain child sexual abuse offences with unpaid compensation orders of 12 months or more to apply to the ATO for visibility of the offender’s additional personal or salary sacrifice superannuation contributions. They will then be able to apply for a court order from the Federal Circuit and Family Court of Australia to access those contributions.

Following the making of an order, the ATO will facilitate any release of monies with superannuation providers and pay released amounts directly to the victims and survivors. Eligible victims and survivors will be able to apply to the ATO from 21 May 2027.

SMSF Sector By The Numbers

The ATO’s quarterly statistical report for March 2026 provides a current view of the SMSF sector. There are 672,805 SMSFs with 1,239,977 members holding total estimated assets of $1.06 trillion.

The top asset types held by SMSFs by value are listed shares at 26 per cent of total estimated SMSF assets and cash and term deposits at 16 per cent. Male members make up 53 per cent of SMSF membership while female members account for 47 per cent. Some 85 per cent of SMSF members are 45 years or older.

The full report is available at the ATO’s Self-managed super fund quarterly statistical report.

Common SMSF Annual Return Errors To Avoid

The ATO has highlighted a series of recurring errors in SMSF annual returns that cause processing delays and unnecessary rework.

Missing information is one of the most frequent issues. All mandatory fields must be completed, even if nothing has changed from the previous year. Incomplete auditor details are another common problem – returns are sometimes submitted without a valid auditor registration number or before the audit has been finalised. The ATO recommends ensuring the audit process is complete and that trustees have received a copy of the signed and dated audit report prior to lodgment.

Missing or invalid TFNs for members can also lead to delays. The ATO advises verifying TFNs directly against client records rather than relying on pre-filled or previously lodged data. Incorrect dates, values that do not align with approved options and unanswered yes-or-no questions are also flagged as recurring issues.

For 2026 returns, trustees and professionals can use the Self-managed superannuation fund annual return 2026 instructions.

Record Keeping Remains A Legal Requirement

With the new financial year under way, the ATO is reminding SMSF trustees that maintaining good records is both a legal obligation and a practical benefit. Good record keeping makes it easier to provide information to SMSF professionals for independent audits and annual return preparation, helps reduce audit and administration costs and reduces the risk of receiving administrative penalties that are personally payable by each individual trustee or the corporate trustee.

Even where a super or tax professional administers the SMSF, each trustee remains responsible for record keeping. The ATO has published a video on record keeping requirements to help trustees understand their obligations.

Last Updated on July 31, 2026 by Nick Ross