These obligations include complying with income tax return lodgement requirements and updating the accuracy of their details on the Australian Business Register annually.

Last week, Treasury released draft legislation for consultation about the new conditions for ABN holders.

Schedule 1 to the bill amends the ABN Act to provide that the Registrar may cancel a person’s registration in the Australian Business Register where they fail to lodge returns for two or more income years and the returns remain outstanding.

Under the proposed law, their registration will also be cancelled where a person fails to confirm the accuracy of their details held by the Registrar in a 12-month period together with confirmation that their ABN is still required.

Speaking to SMSF Adviser, DBA Lawyers director Daniel Butler explained ABN holders are currently able to retain their ABN regardless of whether they are meeting their income tax return lodgement obligation or the obligation to update their ABN details.

Mr Butler said the proposed ABN changes could have a substantial impact on SMSF members with outstanding tax returns or SMSF annual returns for two or more income years.

“If an SMSF’s ABN is cancelled there are a number of follow on consequences,” said Mr Butler.

Mr Butler noted that each SMSF is required to have an ABN, which is a unique identifier for each fund.

Typically, the ABN is also the Unique Superannuation Identifier (USI) for an SMSF which is required for certain transactions such as SuperStream rollovers, he said.

“SMSFs also have tax file numbers. Without a TFN, a 47 per cent tax rate is withheld from certain payments such as interest and dividends.”

SMSFs with a corporate trustees also have an Australian Company Number (ACN).

While the ABN was supposed to supersede the ACN, Mr Butler said the government appears to have overlooked this.

The cancellation of an ABN could also have adverse GST consequences for some SMSFs, he warned.

“An ABN is required for an entity to register for GST. An SMSF can register for an ABN and GST without having to prove its conducting an enterprise.”

Where an ABN has been cancelled, Mr Butler said Super Fund Lookup will display ‘Regulation details removed’ for the fund which will prevent employer contributions and rollovers being made.

Under the current rules, If an annual return for an SMSF is two weeks overdue, the ATO will remove the fund’s regulation details on the first business day of the month.

The draft legislation states that where a person’s registration is cancelled, the Registrar will reinstate the registration if the person lodges or arranges to lodge the relevant tax returns with the ATO.

Once the legislation is passed, SMSFs will also need to ensure that they confirm the ABN details each financial year.

Based on previous comments by the ATO back in 2019, it is expected that SMSF members will be confirm the accuracy of the details held for the ABN through the lodgement of the SMSF annual return, said Mr Butler.

The ATO told SMSF Adviser in 2019 that the government would look to minimise the impact of the changes on ABN holders.

“This includes allowing ABN holders to check their ABR details through existing business interactions, such as through the lodgement of income tax returns, without the need to introduce new reporting processes,” it stated.

Mr Butler noted that the earlier the Registrar could cancel an ABN would be the second half of 2024 following a person’s failure to lodge an income tax return for the income years beginning on 1 July 2022 and 1 July 2023.

“If an SMSF’s ABN is cancelled, they should lodge the outstanding returns or information asap and notify the ATO or if more time is needed, make arrangements with the ATO to lodge.”

Last month ATO assistant commissioner, SMSF risk and strategy, Justin Micale stated that there were around 24,000 SMSFs in total who hadn’t lodged their first return and a further 80,000 lapsed lodgers with one or more outstanding returns.

“For the 2020–21 year specifically, there are around 67,000 returns outstanding — while I know it has been a challenging year, these figures highlight there is a lot of ground to make up,” said Mr Micale.