The legislation was drafted to give the Australian Taxation Office more flexibility and new penalty powers when dealing with non-compliance.

It also proposed harsher penalties for promoters of illegal early release schemes and would have made rollovers to an SMSF a designated service under the anti-money laundering laws.

Peter Burgess, head of policy and technical at AMP SMSF, said these changes would have addressed some “legislative shortcomings” in the SMSF sector.

“All of these changes are about strengthening the integrity of the sector and helping to minimise the likelihood of fraud occurring in the SMSF sector – of critical importance at a time when assets under management are about $500 billion,” Mr Burgess said.

While the scrapping of the proposed banning of off-market transfers was seen broadly as a win for the sector, Mr Burgess said some tightening of the rules may still be necessary.

“It is likely the government of the day will need to revisit their position on SMSF off-market transfers and a tightening of the rules, rather than the outright banning of off-market transfers, would be in the best interest of the SMSF sector” he said.