ATO targets SMSFs with new penalties
Hundreds of large and small Australian business owners register new self managed superannuation funds (SMSF) every day.
Undoubtedly SMSF allows greater investment freedom and flexibility. Yet SMSF also operates within a strictly regulated framework. Now SMSF regulations are set to be even tighter. The ATO has introduced new penalties for specific superannuation rule breaches. These new penalty powers took effect on 1 July 2015 and are something that every SMSF holder should be fully across.
In addition to all existing penalties that can be applied, there are three types of new penalties that the ATO can impose being:
- Further SMSF education: if the ATO does not consider that you satisfactorily understand your role as trustee of your SMSF, it can direct you to undertake a further SMSF education course at your expense. This penalty is most likely to occur in the case of a first time contravention where the trustees were not aware of the rules.
- Rectification: the ATO can direct you to correct any breaches of superannuation rules that your fund has made. Imposition of this penalty will depend on individual circumstances, like the particular rule being breached, value of the breach relative to the size of the SMSF and whether your fund has made the same breach before.
- Financial penalty: superannuation rule breach can result in an administrative penalty. The ATO has an extensive range of fines at their disposal. They can administer everything from $850 for minor administrative breaches through to $10,200 for SMSF investment breaches.
All levied fines apply to each individual fund trustee. So if you have more than one trustee, the penalty can apply equally to each individual trustee. That means your SMSF could be up for up to four times the standard penalty.
Conversely, where you have a company as the trustee of your self-managed fund only one penalty is imposed. Here, all directors of the trustee will be held jointly and severally liable to pay the fine. The fine must be paid from either the company trustee or the personal resources of the company’s directors or individual trustees. The penalty fine is not permitted to be paid from SMSF fund monies.
The ATO does have power to remit a penalty. Each case for remission will be judged on its merits and there is no one determining factor.
It is your responsibility to ensure that your superannuation fund meets the rules at all times. Your Highview accountant can be invaluable in supporting your fund to comply with the rules. If you are concerned that your fund may have fallen foul of the rules or even if you are not sure of the rules, give Highview a call. We’d be happy to help you come up to speed with the rules, understand their impact on your particular circumstances and guide you as to any remedial action you may need to take.