Profit shifting into SMSFs and the calculation of tax losses, Mr Millson said, were two of the main issues concerning the ATO.

Non-arm’s length income, he said, is “major income-related tax risk for the sector”.

“Our compliance program is targeting large trust distributions or dividends paid from a private entity at rates that are unusual compared with the market value of the investment that the super fund holds,” said Mr Millson.

“In many cases we’re not just looking at the relationship between the fund and the immediate entity that it’s dealing with, we sometimes need to scrutinise several layers of entities that the profits pass through to determine whether the fund’s income is arm’s length.”

In terms of the calculation of tax losses, Mr Millson said trustees and tax agents need to ensure these losses are calculated correctly.

“Funds in pension phase must be particularly careful when they calculate their carry forward losses – in many cases a tax loss of a pension phase fund will not be able to be applied against its accessible income in a future year,” he said.

The most common breach among SMSF members, Mr Millson said, continues to be loans and financial assistance to members.

“We see this breach in about 21.5 per cent of the auditor contravention reports that we receive,” he said.

He also stressed the importance of clients contacting the ATO to disclose breaches of superannuation or tax laws before they are detected by the ATO’s data analysis and intelligence as they will be far better off.

“We can work with them to agree on an appropriate settlement,” said Mr Millson.

He said trustees sometimes try to hide contraventions from the ATO or don’t cooperate when they are contacted.

“We put more resources into these cases and we investigate them more thoroughly so [that we’re] satisfied we’ve identified every contravention, and at the end of the day we seek higher penalties,” he said.