From 1 July 2014, new laws give the ATO greater powers to issue a range of penalties to trustees of SMSFs that breach superannuation laws. Review an overview of these new powers.
From 1 July 2014, new laws give the Australian Taxation Office (ATO) greater powers to issue a range of penalties to trustees of SMSFs that breach superannuation laws.
These new powers include:
- Rectification directions
- Education directions
- Administrative penalties
They will apply not only to contraventions occurring from 1 July 2014 but also to contraventions that occurred prior to that date but continue after.
"Rectification directions" will be where the ATO can require a trustee to undertake a specific action to rectify a contravention. Evidence of compliance will need to be provided to the ATO and if not forthcoming, fines may apply.
The ATO will also be able to give an "education direction" requiring trustees to undertake a specified education course within a specified timeframe. Failure to successfully complete this and provide evidence to the ATO may also result in fines being levied.
Finally, the ATO will have the ability to impose "administrative penalties" directly on the trustees for contraventions. These penalties can be up to $10,200 per trustee and must be paid personally, not using SMSF funds. Some of the contraventions and penalties applicable include:
|SISA Section||Rule||Administrative Penalty|
|s35B||Failure to prepare Financial Statements.||$1,7000|
|s65||Lending or providing financial assistance to members & their relatives.||$10,200|
|s67||Super fund borrowings, outside the permitted exemptions (e.g. limited recourse borrowing arrangement).||$10,200|
|s84||Trustees have not taken reasonable steps to comply with the In House Asset Restrictions.||$10,200|
|s103(1) & (2)||Failing to keep trustee minutes for at least 10 years.||$1,700|
|s104||Failing to keep records of change of trustees for at least 10 years.||$1,700|
|s104A(2)||Failing to sign Trustee Declaration within 21 days of appointment and keeping for at least 10 years.||$1,700|
|s105||Failing to keep member reports for 10 years.||$1,700|
|s106||Failing to notify ATO of an event that has significant adverse effect on the super fund's financial position.||$10,200|
|s106A||Failing to notify ATO of change of status of SMSF, e.g. super fund ceasing to be a SMSF.||$3,400|
|s160||Failing to comply with ATO Education directive.||$850|
|s254(1)||Failing to provide the Regulator with information on the approved form within the prescribed time upon establishment of the super fund.||$850|
|s347A(5)||Failing to complete a form with requested information provided by the Regulator as part of the Regulator's Statistical Program.||$850|
In addition to these new powers, the ATO still has access to existing powers including non-compliance, disqualification of trustees and civil or criminal prosecutions for serious or continued contraventions.
To avoid penalties it is essential for trustees to ensure that their SMSF is fully compliant with superannuation laws. If you have any questions please speak with your usual Hanrick Curran Adviser or contact the SMSF SPAA Accredited experts at Hanrick Curran, Chris Campbell and Clive Todd on 07 3218 3900.