The ATO now has more power to deal with trustees in self-managed superannuation funds (SMSF’s) who are breaching the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act).
The ATO’s extended powers to deal with breaches in SMSF’s came into force on 1 July 2014.
What were the penalties that the ATO could impose before 1 July 2014?
Prior to 1 July 2014, where a SMSF was not complying with the SIS Act, the ATO was able to:
- issue a notice of non-compliance to the SMSF, which in effect would cause the SMSF to lose tax concessions;
- apply to the Court for civil and criminal penalties to be imposed;
- accept an enforceable undertaking in relation to the contravention of the SMSF and its rectification;
- disqualify the trustee of the SMSF.The position on these powers of the ATO was that the powers did not allow the ATO to impose a penalty proportionate to the applicable breach of the SMSF.
What are the penalties that the ATO can impose now?
In addition to the above penalties, where a SMSF breaches the SIS Act, the ATO now has the power to:
- issue a rectification direction;
- issue an education direction;
- impose an administrative penalty of up to $10,200 for each breach, which is payable personally by the trustee or director who responsible for the breach.
What is a rectification direction?
A rectification direction issued by the ATO to a SMSF is a notice requiring the trustees to take specific action to rectify a contravention of the SIS Act. The ATO will provide a specified time frame for this rectification action to occur.
What is an education direction?
An education direction issued by the ATO to a SMSF is notice requiring the trustees of a SMSF to undertake further education to improve their competency as trustees.
The ATO will generally require the trustees to participate in a webinar or online course to improve their ability to meet their obligations as trustee.
A person who fails to follow an education direction will receive a penalty of $850.
What are the administrative penalties?
Administrative penalties are issued by the ATO to the trustees of an SMSF where there has been a breach of a specific provision of the SIS Act.
Administrative penalties range from $850 to $10,200, and must be paid personally by the trustee who has received the penalty.
If you are unsure of whether your SMSF is complying with the SIS Act, or whether you are meeting your obligations as a trustee of a SMSF, please do not hesitate to contact me.