New powers handed to ATO re SMSF trustees

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Ask Wen how to avoid SMSF non-compliance. Call our Epping office on (02) 9871 3429

The ATO has recently been handed new powers to compel compliance by self-managed super fund trustees with their duties and obligations. These are in addition to existing powers and commence on 1 July 2014.

New tools to deal with SMSF non-compliance

Tax and Superannuation Laws Amendment (2014 Measures No.1) Bill was passed by parliament on 6 March 2014. It provides the ATO with three new compliance treatments to deter and address non-compliance by SMSF trustees:

  • education direction (under Section 160)
  • rectification direction (under Section 159), and
  • administrative penalties (under Section 166).

The new treatments took effect from 1 July 2014 and apply to contraventions that:

  • are made on or after 1 July 2014, or
  • remain unrectified after 30 June 2014.

Failure to comply

If the trustee fails to comply with the rectification direction within the specified period, then the trustee has committed an offence of strict liability and is liable to a penalty of $1,700 (which equates to 10 penalty units).

It may also lead to a trustee or director being disqualified or a notice of non-compliance being issued, which may result in a significant tax penalty on the SMSF.

Administrative penalties

Where a trustee contravenes a specific provision of the SIS Act, an administrative penalty will be imposed.
Examples include:

  • 60 penalty units (which equates to $10,200) for breaching
    • the lending rules
    • the borrowing rules, or
    • the in-house asset rules
  • 20 penalty units (which equates to $3,400) for breaching operating standards
  • 10 penalty units (which equates to $1,700) for:
    • not keeping proper minutes and records, and
    • failing to inform the regulator of changes in trustees / directors
    • 5 penalty units (which is $850) for failure to comply with an education direction.

W Wen and Co are registered SMSF auditors For more information please contact Wen at our Epping office on (02) 9871 3429