From 1 July 2014 the ATO will have greater powers under the Superannuation Industry (Supervision) Act 1993 in dealing with SMSF trustees who breach super law.
Currently if a SMSF fund breaches law the ATO can only declare it non-compliant (and lose favourable tax treatment) or go to court.
Under new Part 20 of the SIS Act new powers will apply to contraventions occurring from 1 July 2014 including:
- administrative penalties
- education directions
- rectification directions.
The powers will also apply to contraventions that were made prior to 1 July 2014 and continue after that date, for example, if a fund has lent money to a member or relative and the loan still exists on or after 1 July 2014.
Penalties will vary according to the type of breach. For example a breach of the section 65 lending restrictions, will make each individual trustee personally liable for a penalty of $10,200. For an SMSF with a corporate trustee each director will be jointly and severally liable for a penalty of $10,200.
The penalty cannot be paid using the resources of the SMSF and doing so would be considered a serious breach likely subject to more significant penalties from the ATO.
The penalties include:
| SIS Section | Breach | Administrative Penalty |
|---|---|---|
|
s35B |
Failure to prepare Financial Statements |
$1,700 |
|
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 |
| s.103(1) & (2) | Failing to keep trustee minutes for at least 10 years | $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 super fundÂ’s financial position | $10,200 |
| s.106A | Failing to notify ATO of change of status of SMSF, e.g. super fund ceasing to be a SMSF | $3,400 |
| 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 super fund | $850 |
