Registered Status – Not Determined – Not Helping

Recent changes to the operation of the ABN website have resulted in newly established SMSFs bearing the description – “Registered – Status: Not Determined”.  This moniker will remain with the fund until the ATO processes the first annual return for the fund and issues a notice of compliance.

This process follows the design of the SIS Act.  SMSFs must be first established (eg by signing the relevant trust deed and then receiving the first contribution – whether nominal or substantial) and be registered with the ATO.

Registration of the fund with the ATO involves the trustee of the fund completing and submitting the ATO Form (NAT 2944) to the ATO (or completing the form online).  This form combines a number of functions – it is the application for an ABN for the fund, also an application for GST registration (if the trustee is so minded), an application for a TFN and finally an election for the fund to be regulated under the Superannuation Industry (Supervision) Act, 1993.

Being a regulated super fund is a necessary but not sufficient condition for the fund to be a complying super fund.

A fund will only become a complying super fund if and when the ATO issues a notice of compliance in respect of the fund.  In general terms, if the election to be regulated is made within 60 days of the establishment of the fund, then the fund will be deemed to have been a complying fund retrospectively from its establishment.

The moniker – “Registered - Status: Not Determined” accurately (though unhelpfully) describes the status of the fund between its establishment and the date of issue of the notice of compliance.  Once the first annual return of the fund has been processed and the notice of compliance issued – the ATO will update the ABN website and change the moniker of the fund to “Complying”.  Given that a fund may be established early in a financial year the moniker of the fund may remain “Status  Not Determined” for 14 or more months.

The “Registered – Status: Not Determined” is unhelpful as it may lead individuals and organisations which are not familiar with the SMERF world, to conclude that the recently established fund is not bona fide or it is about to have its licence suspended.

We are aware of a recent situation where a SMSF was established for the purpose of undertaking a limited recourse borrowing investment with an external lender, only to have the external lender nearly pull the plug on the transaction because a due diligence search on the fund identified that the funds status was “Not Determined”.  

Given that the ATO is unlikely in the near future to devise a better moniker for the current one, there seem to be two responses.

First, when dealing with individuals and organisations who are not acquainted with the SMERF mysteries – to forewarn them of the moniker and to explain the reason and the significance of it.  In this manner, expectations are managed and issues resolved.

The second (if circumstances permit), is to establish the fund in late June with a view to lodging an annual fund return early in the new financial year, thereby bringing forward the issue of the notice of compliance and a quick change of moniker.