“During COVID, ATO officers were at the forefront of dishing out aid and being emphatic to taxpayers,” said Mr Butler, speaking on the SMSF Adviser Show podcast.

“They’re now back into compliance mode and doing reviews and examinations and are even [issuing] questionnaires [in some cases].”

Mr Butler said he has seen some SMSFs with rental properties in particular given extensive questionnaires to respond to with the ATO homing in on property deductions at the moment. 

“The ATO are also following up on a lot of tax payments that are outstanding and they certainly want to bring in the outstanding tax returns,” he stated.

With the ATO scaling up its compliance action and undertaking thorough reviews, Mr Butler said SMSFs with contraventions may want to consider using the ATO’s early engagement and voluntary disclosure service.

“The ATO have said they will take a firm but fair approach with early engagement and voluntary disclosure and will take [the fact] that you’re coming forward into account,” he said.

One of the biggest contraventions in the past few years has been loans to members or illegal early access, said Mr Butler, which is another major focus area for the ATO.

“Some trustees have been tempted, particularly those going through a hard time and are trying to run a household or business, to put their hand in the money jar,” he stated.

“We have had clients like that who felt the world was on their shoulders, that they had no other option but to save their business or save their family and we’ve had to put the best case forward to the ATO and say, ‘look this person was under immense pressure and, they did the wrong thing but now they’re wanting to do their best and return the fund to full compliance — here are our steps’.”

For trustees who plan to report these kinds of contraventions to the ATO through the voluntary disclosure service, Mr Butler said they should have an orchestrated plan worked out, their cash flow position and put forward a viable submission to the ATO that shows remorse and that they’re trying to do the right thing.

“If it’s really bad, you may want to fall on your own sword. The [trustee] might want to just say ‘I’ve stuffed up, it was too tempting and an SMSF is not for me, I don’t have that self-responsibility, I don’t have that discipline and I’m happy for the ATO to render me a disqualified person,” he said.

“You’ll notice that over the past year, the number of disqualified persons has risen quite substantially from year on year out. So the ATO is using that as a strategy to get rid of those people who are not really suitable for the SMSF environment.”