Tax Compliance Behaviour in Australian Self-Managed Superannuation Funds

EJTR Vol. 13 No. 3 Dec. 2015 at 740. The ISSN is 1448-2398.

U. of Adelaide Law Research Paper No. 2016-05

22 Pages Posted: 11 Feb 2016

See all articles by George Mihaylov

George Mihaylov

University of Adelaide

John Tretola

University of Adelaide - School of Law

Alfred Yawson

University of Adelaide; Financial Research Network (FIRN)

Ralf Zurbruegg

University of Adelaide; Financial Research Network (FIRN)

Date Written: December 30, 2015

Abstract

The rapid growth of self-managed superannuation funds (SMSFs) in Australia over the past two decades has been mirrored by a host of legislative and taxation rulings regulating the sector. The need for trustees to remain compliant with the relevant regulations is of paramount importance given the severity of the penalties they face for contraventions. We review the main rules governing SMSF compliance along with several notable legal cases of non-compliance. We then provide a comprehensive quantitative analysis of compliance outcomes in 321 SMSFs from across Australia.

This research paper focuses only on SMSF trustee behaviour in respect of funds where the auditor has reported a breach. It does not refer to SMSF funds that are technically non-compliant as that term is defined in s 42A of the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act). Therefore, in terms of this paper, whenever a SMSF is referred to as non-complying regard is only had to a SMSF where an auditor has reported a breach of any of the regulatory rules.

The results of our research suggest that trustee literacy is positively associated with fund compliance, whereas trustee overconfidence cannot be linked with compliance outcomes for the sample. Moreover, compliant funds also appear more likely to allocate a greater share of their superannuation portfolios to conservative asset classes (cash and domestic equities), typically linked with under-diversification in SMSFs. Our findings therefore suggest that the financial risks borne by under-diversified SMSFs may at least in part be offset by a lower compliance burden for these funds.

Keywords: self-managed superannuation funds

Suggested Citation

Mihaylov, George and Tretola, John and Yawson, Alfred and Zurbruegg, Ralf, Tax Compliance Behaviour in Australian Self-Managed Superannuation Funds (December 30, 2015). EJTR Vol. 13 No. 3 Dec. 2015 at 740. The ISSN is 1448-2398. , U. of Adelaide Law Research Paper No. 2016-05, Available at SSRN: https://ssrn.com/abstract=2731013

George Mihaylov

University of Adelaide ( email )

233 North Terrace
Department of Finance
Adelaide, SA 5005
Australia
+61 8 8313 2056 (Phone)

HOME PAGE: http://www.adelaide.edu.au/directory/george.mihaylov

John Tretola (Contact Author)

University of Adelaide - School of Law ( email )

Ligertwood Building
Adelaide 5005, South Australia SA 5005
Australia

Alfred Yawson

University of Adelaide ( email )

No 233 North Terrace
Adelaide, South Australia 5005
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Ralf Zurbruegg

University of Adelaide ( email )

233 North Terrace
Department of Finance
Adelaide SA 5005
Australia
+61 8 8303 5535 (Phone)
+61 8 8303 4368 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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