With the ATO increasing scrutiny on SMSFs, new LRBA rules taking effect from 10 August 2026, and annual return season approaching, here’s what trustees need to know and act on now.
Graeme Colley, a respected educator, policy advisor, and technical expert with over 30 years’ experience in taxation and superannuation is back with a new blog post covering key updates for SMSFs.
The regulatory environment for self-managed super funds continues to evolve, and 2026 brings a number of developments that trustees cannot afford to overlook. The Australian Taxation Office has sharpened its focus on SMSF compliance, market valuations of fund assets remain a key area of scrutiny, and significant changes to Limited Recourse Borrowing Arrangements take effect from 10 August 2026. With annual return lodgement deadlines on the horizon, now is the time to ensure your fund is in order. In this update, Graeme Colley, SMSF Advisor at Cloudoffis, walks through the key issues trustees should be across – and the steps you should be taking today.
You can expect that the ATO will be on the lookout this year with several audit and compliance areas expected to receive attention.
One area which is expected to receive greater attention will be asset valuations and fund documents due to the introduction of Division 296. Valuations for these purposes will rely heavily on accurate and supportable asset valuations. Auditors may request additional evidence for assets which have not been requested previously but may form part of their annual compliance review.
Under the new legislation, it is possible for a trustee to reset the cost base of all its assets as at 30 June 2026 solely for the purposes of Div 296. The resetting of the cost base requires the trustees to make an election prior to the lodgement of the fund’s 2026/27 annual return.
As a result of the ATO’s increased attention to the value of the fund’s assets, auditors are more likely to require trustees to obtain and retain appropriate valuation evidence each year.
Therefore, trustees should make sure they have the following documents ready prior to the fund’s audit:
In some cases valuation documents may need to be obtained from trustees, related entities, valuers or other advisers to assist with the annual compliance and audit process.
The ATO has recently published some of the most common errors in SMSF annual returns. They have pointed out that they can be simple administrative errors where the information is invalid or missing from the fund’s return. Small oversights can lead to delays in processing and result in a rework of the return for the fund’s tax agent or the auditor.
Some of the more common issues with missing information in the return are:
In our previous newsletter we included some information on this year’s budget announcement which prohibited SMSFs from establishing new limited recourse borrowing arrangements (LRBA) investing in residential property from 10 August this year. Unfortunately, the changes did not include any explanation of whether any arrangements entered into prior to commencement of the legislation but not finalised before 10 August would be treated.
The ATO recently clarified when new LRBAs would be quarantined and excluded from the new legislation. They say that the new rules will not apply if an SMSF exchanges a binding contract to acquire real property before 10 August 2026. It will apply even if the contract is settled or the documentation establishing the LRBA is entered into on or after 10 August 2026.
Also, later variations of the contract will not change whether the original arrangement will be quarantined. However, if a contract is changed significantly and the fundamental terms no longer exist, it may be considered that a new arrangement has begun.
Some LRBAs have accounts with financial institutions which have offset account arrangements. Many of the offset arrangements are with Authorised Deposit-taking Institutions (ADI) such as banks but others include arrangements with finance companies which are not ADIs. We understand that auditors will continue to review offset account arrangements, particularly where the lender is not an ADI as the type of account structure may create compliance issues with the fund. This could relate to:
If the LRBA enters into either of these arrangements it is possible that may have breached section 67A.
If you’d like to speak to one of the Cloudoffis experts, you can reach out here.
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