New SMSF penalty powers for ATO

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


Failure to prepare Financial Statements



Lending or providing financial assistance to members & their relatives


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 fund’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

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