As I’ve mentioned, from 1 July there are new penalties and we have new direction giving powers. We can impose penalties that are more in line with a breach than was previously the case but our discretion on whether or not to apply a penalty is limited. In conjunction with the new penalty regime is the new approach to ACRs which I just outlined. Not every ACR will lead to a penalty, but every ACR that leads to an ATO audit that then confirms an eligible breach will result in an SMSF administration penalty imposed on the trustees.
The accuracy and independence of SMSF auditors has always been critical to our compliance monitoring but now we’ll be relying even more on these auditors to identify and rectify minor breaches. I’ll return to auditors later. I now want to run briefly through the new compliance landscape.
In dealing with non-compliance by SMSF trustees, we may take one or several courses of action, depending on the seriousness of the contravention and the circumstances involved.
The Tax and Superannuation Laws Amendment (2014 Measures No.1) Act 2014 has given us three new regulatory compliance powers to deter and address non-compliance by trustees: education directions; rectification directions; and administrative penalties. If you come across a contravention, fix it. If it’s too late, then talk to us. We will work with you to avoid the worst outcome where we can. Our primary interest is the compliance of the fund. For penalties to be imposed there will usually need to be an unrectified contravention or repeat contraventions that lead us to start audit action.
Which brings me to my next point: while we’re certainly cracking down on serious and deliberate non-compliance we’re also always looking to see how we can help to improve the competency of trustees. The more ably SMSF trustees can meet their regulatory obligations the less likely they will be to contravene the law.
If we give an education direction, to comply trustees will need, within a nominated timeframe, to either undertake a free trustee education course via the SMSF trustee website (www.smsftrustee.comExternal Link) or attend a free SMSF trustee webinar run by the ATO.
The Self-managed Superannuation Fund Trustee Education program has been released by the Joint Accounting Bodies: the CPA (Chartered Practising Accountants), the ICAA (Institute of Chartered Accountants of Australia) and the National Institute of Accountants (NIA). I’d like to take this opportunity to thank you for partnering with your fellow professionals to provide this education. Your associations are the first to become approved providers and I congratulate you for your support for trustees and potential trustees. We encourage all trustees to undertake one of these courses even without an ATO direction.
Rectification directions will require a person to undertake specified action to rectify a contravention within a specified time and to provide evidence of compliance with the direction. Rectification generally involves putting into operation managerial or administrative arrangements that could reasonably be expected to ensure that there are no further similar contraventions. We will usually allow six months to fix the problem.
Probably the penalty part of the new legislation has received the most public attention. We’re optimistic that penalties received the first time around will be taken seriously and will reduce repeated compliance breaches. The highest administrative penalty is $10,200 and it applies to each trustee individually, that is a penalty of $10,200 per trustee not per fund. For a corporate trustee where there is only one trustee and therefore only one penalty, to be paid jointly and severally by the directors.
It’s worth emphasising that the penalty is to be paid from personal, not SMSF, assets. I should say too, because we’ve been asked about this, that trustees cannot get the penalty reimbursed as an expense of the SMSF. All trustees and directors are liable for the actions of their fellow trustees and directors. This might have an impact on the willingness of trustees who are not members from continuing in a trustee role.
Source:- https://www.ato.gov.au/Media-centre/Speeches/Other/Update-from-the-ATO-on-recent-compliance-activity,-areas-of-concern-with-SMSFs-and-the-ATOs-future-priorities/
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