SMSF compliance guide: the rules, the audit, the caps

How SMSF compliance is enforced

The Superannuation Industry (Supervision) Act 1993 — always called the SIS Act — is the primary piece of legislation. The Act sets out who can be a trustee, what a super fund is, and the operating standards every regulated fund has to meet. Alongside it, the SIS Regulations spell out the detail: contribution acceptance rules, in-house asset limits, the investment strategy requirement (Reg 4.09), collectible storage rules (Reg 13.18AA), and dozens more. For SMSFs specifically, the ATO is the regulator — APRA regulates the large public funds instead.

The enforcement mechanism most trustees interact with is the annual audit. Every SMSF, regardless of size, must be audited each year by an SMSF auditor registered with ASIC. The auditor issues two opinions — one on the financial report, one on compliance with the SIS Act and Regulations — and if they identify a reportable contravention, they must lodge an Auditor Contravention Report (ACR) with the ATO. The ATO uses a documented compliance approach: an ACR does not automatically mean penalties. Small, first-time, self-corrected breaches usually attract an education letter; systematic, willful, or high-value breaches escalate through enforceable undertakings, administrative penalties (measured in penalty units — currently $330 each), and in serious cases the fund can be made 'non-complying', which taxes fund assets at 45%.

The most-breached rules are consistent year over year: loans to members or relatives (an absolute prohibition), in-house asset limits, mixing fund and personal money, illegal early access to preserved benefits, and non-arm's-length dealings. Non-arm's-length income (NALI) is worth calling out — if the fund receives income on terms more favourable than an arm's-length dealing would produce (below-market rent, an unusually generous private-company dividend, or a related-party loan on soft terms), that income is taxed inside the fund at 45%, not 15%. Recent NALI amendments have also extended the concept to expenses that are less than they'd be on arm's-length terms.

On the contribution side, compliance means staying inside the caps. From 1 July 2024, the concessional cap is $30,000 per member per year (indexed) and the non-concessional cap is $120,000 with a three-year bring-forward available if you're under 75 and eligible. The transfer balance cap — the lifetime limit on the amount you can move into pension phase to enjoy the 0% earnings tax — is currently $1.9 million and indexed in $100,000 increments. Contribution splitting between spouses, carry-forward concessional contributions where a member's balance is below $500,000, and the $300,000 downsizer contribution are all levers experienced SMSF trustees use inside the cap framework.

The final piece is reporting. Every SMSF lodges the SMSF annual return (SAR), which combines the income tax return, regulatory return, and member contribution statements. Pension events — commencing, commuting, or moving pension money in ways that affect the transfer balance account — are reported separately on TBAR, quarterly, within 28 days of quarter-end. easySMSF administrators run this whole calendar for you, and our audit is bundled into the monthly fee for standard funds; you'll never receive a surprise auditor invoice at year-end.

• SIS Act 1993 + SIS Regulations enforced by the ATO
• Annual audit by an ASIC-registered independent auditor — mandatory
• SAR lodged annually, TBAR lodged quarterly (28 days after quarter-end)
• Concessional cap $30k, non-concessional cap $120k, TBC $1.9m
• easySMSF audit is included in the monthly fee for standard funds