From 1 July 2013, where SMSF contraventions or non-compliance issues occur, the ATO has implemented a new Penalty Regime for SMSFs.
In 2013 and previous years, the ATO had limited powers in dealing with a contravention including:
- SMSF is non-compliant
- Enforceable undertaking based on the contravention
- Apply for a civil (or criminal) penalty to be imposed
- Remove/ disqualify trustee/ member
There is no scope to deal with minor breaches of SIS, as all of the above measures are time consuming, costly and generally inefficient to implement and review.
The new measures provide the ATO greater power and flexibility in dealing with a fund’s non-compliance with the law, including:
- rectification and education directions for contraventions of the Super Law;
This will require a member(s) to undertake a specific action to rectify the contravention within a specified time frame. Much like an Enforceable Undertaking, the member will need to provide evidence of compliance with the direction.
- an administrative penalty regime for SMSF trustees for certain contraventions of the SIS Act
This will require a person to undertake a specified course of education within a specified time frame and provide evidence of completion of the specified course.
Importantly, if an administrative penalty is imposed, the penalty must be paid personally by the trustee or the director of the trustee company and cannot be paid or reimbursed by the SMSF.
Therefore, it is important for all SMSF members to understand their roles as members/ trustees of SMSF’s.
The table below provides a listing of rules and administrative penalties to apply.
|
Section & Rule |
Administrative Penalty |
| s.35B – failure to prepare Financial Statements |
$1,700 |
| s.65 – prohibition on lending or providing financial assistance to members & their relatives |
$10,200 |
| s.67 – prohibition on super fund borrowing, except as permitted, eg limited recourse borrowing arrangement |
$10,200 |
| s.84 – contravention of In-House Asset rules |
$10,200 |
| s.103(1) & (2) – failing to keep trustee minutes for at least 10 years |
$1,700 |
| s.103(2A) – failure to maintain a s.71E election, where applicable, in relation to a fund with an investment in a pre 11/8/99 related unit trust |
$1,700 |
| s.104 – failing to keep records of change of trustees for at least 10 years |
$1,700 |
| s.104A – failing to sign Trustee Declaration within 21 days of appointment and keeping for at least 10 years |
$1,700 |
| s.105 – failing to keep member reports for 10 years |
$1,700 |
| s.106 – failing to notify ATO of an event that has significant adverse effect on the fund’s financial position |
$10,200 |
| s.106A – failing to notify ATO of change of status of SMSF, eg fund ceasing to be a SMSF |
$3,400 |
| s.124 – where an Investment Manager is appointed, failing to make the appointment in writing |
$850 |
| s.160 – failing to comply with ATO Education directive |
$850 |
| s.254(1) – Failing to provide the Regulator with information on the approved form within the prescribed time upon establishment of the fund |
$850 |
| s.347A(5) – Failing to complete a form with requested information provided by the Regulator as part of the Regulator’s Statistical Program |
$850 |
Source: Australian Tax Office
Ivan Filipovic is a Director of Redwood Advisory. Please call on 1300 790 110 or email at service@redwoodadvisory.com.au with any questions.
Disclaimer – The content has been prepared without taking account of the objectives, financial situation or needs of a particular individual and does not constitute financial product advice.
