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 funds 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|