19 Sep SMSF Penalties
With the increased popularity of Self-Managed Superannuation Funds (SMSFs) the ATO has introduced new penalty power. Penalties from 1 July 2014 are to be applied against trustees who breach their fiduciary obligations.
From 1 July 2014 there will be three new penalties the ATO can impose against the trustees of Self-Managed Superannuation Funds (SMSFs):-
- A direction to undertake an education course to improve the trustee’s knowledge of SMSFs (education directions);
- A direction to rectify any breaches of the superannuation rules that the fund has not complied with (rectification directions);
- Administrative penalties ranging from $850 for minor matters to $10,200 for more serious breaches of the superannuation rules.
It is important to note that any fines incurred will have to be paid by the trustee and not the superannuation fund.
It should be noted that any fines that are incurred are levied on the trustee and cannot be paid from the superannuation fund.
In the case where there are individual trustees, fines are applied to all individuals. However, if the fund has a company as its trustee, only one penalty will be imposed with all directors liable to pay the single fine.
For example, let us take a SMSF that has three individual trustees with a breach that incurs a $10,200 penalty. The ATO will levy the penalty on all three trustees resulting in a total penalty of $30,600. If the same fund had a corporate trustee in place the breach would result in a single penalty of $10,200.
There have always been reasons to make a corporate trustee an attractive option for SMSFs such as ease of succession planning and administration efficiency. Whilst there are limited circumstances where an individual director of a corporate trustee may be individually liable, for the most part, the changes to the penalty regime have given further incentive to avoid individual trustees.
Some of the breaches and penalties that can be imposed by the ATO include:
|Lending or providing financial assistance to members and relatives of members||$10,200|
|Borrowing by superannuation funds (except in limited circumstances)||$10,200|
|Contravention of in-house asset rules||$10,200|
|Failure to keep trustee minutes for 10 years||$1,700|
|Failure to prepare financial statements||$1,700|
|Failure to keep member records for 10 years||$1,700|
|Failure to comply with an ATO education directive||$850|
It should be noted that the ATO have advised that the new penalty regime will be applied to any pre-existing contraventions that have not been rectified by 1 July 2014.
As you can see the ATO is very serious about ensuring trustee compliance so if you have concerns regarding the above, simply want more information or have a fund with individual trustees and would like to put a corporate trustee in place, we encourage you to contact Forsythes Accounting Partner Nadine Harvey on 02 4926 2699.