Will your SMSF Late Lodgers become High Risk AML/CTF Clients?

Up to now, your SMSF Late Lodgers might be a small burden to your practice. It’s unlikely based on your total Tax Agent Client list that the odd SMSF Late Lodger is tipping you under the Australian Taxation Office (ATO) 85% on-time lodgement benchmark.

And the reason people lodge late varies. Maybe your client has had a spell in hospital or they’ve experience other adverse events that have pushed their SMSF reporting down their priority list.

Right now, you might feel perfectly comfortable that this type of client is one you’ll keep servicing, but will you feel the same come 1 July 2026?

From 1 July 2026 Australian Accounting firms become regulated by Australian Transaction Reports and Analysis Centre (AUSTRAC) and must comply with Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) requirements.

The AML/CTF requirements are all about protecting Australia from money laundering, terrorism financing, proliferation financing and serious and organised crime.

With most accounting firms also acting as ASIC registered office on an ongoing basis, it is likely many SMSF Clients will be subject to the AML/CTF requirements including Client Due Diligence (CDD) from 1 July 2026.

That will mean you’ll need to determine your SMSF Client’s AML/CTF risk rating.

The AML/CTF risk rating system you put together to assess your SMSF Clients will take into consideration the risk factors you have identified for the client type, type of service, service delivery channel and country.

It also needs to take into consideration Red Flags/Indicators of suspicious activity.

Guidance and commentary from both AUSTRAC and the ATO identify SMSF Clients as risky for AML/CTF and compliance purposes:

• AUSTRAC’s Financial Crime Red Flags Guide for Financial Planners references SMSFs twice, namely customers wanting SMSF without being able to substantiate their source of wealth and SMSFs that change trustees/member over a short period of time

• “a red flag for us is where new SMSFs have received a rollover and don’t lodge their first return”

Assistant Commissioner Justin Micale – Speech at Tax Institution Superannuation Intensive 26/03/24

• “for example, we know that non-lodgement is a serious red flag for illegal early access.”

Assistant Deputy Commissioner Emma Rosenzweig – Speech at SMSF Association National Conference – 19/02/25

• “The highest-risk group from our compliance perspective remain SMSFs that are set up, roll over their super, and then never lodge a return – a group we refer to as the ‘never lodgers’. Almost 40% of these funds end up illegally accessing their super, and the value of illegal early access in this group rose by nearly 40% last year”

  
  

Deputy Commissioner Ben Kelly – Speech at SMSF Association National Conference – 18/02/26

AUSTRAC have also published a list of Risk Insights and Indicators of suspicious activity for accountants.

Whilst not specifically on this list yet, based on the commentary above, we expect that SMSF late lodgement could be a Red Flag/Indicator for an SMSF Client.

AUSTRAC’s example for a Medium-Risk AML/CTF client states that there must be NO Red Flags/Indicators present.

It follows that an SMSF Late Lodger could be classified as a High Risk Client for AML/CTF purposes.

For High Risk AML/CTF Clients, you need to implement Enhanced CDD which requires you to take even more steps to verify the identity of the client, their sources of wealth and to conduct more in-depth transaction monitoring.

If you are going to keep servicing clients that are classified as High Risk for AML/CTF purposes, you must also have AML/CTF policies and processes that are catered to managing and mitigating any AML/CTF risk specific to these High Risk clients.

If you’re not ready to police AML/CTF High Risk clients, now is the time to identify your SMSF Late Lodgers and work out if you will continue to service them beyond 30 June 2026.

At Keep It Simple Super we have spent over 15 years helping Financial Advisers and Accountant deliver exceptional SMSF services to their clients. Keeping your clients happy and coming back each year is our goal. Book a discovery call with one of our team to see if we can help you create the perfect SMSF service for your business - Click here