The Australian Taxation Office (ATO) will soon have new powers to deal more directly with contraventions reported in relation to Self-Managed Superannuation Funds (SMSF's).
These powers, granted by the Tax and Superannuation Laws Amendment (2014 Measures No.1) Act 2014, give the ATO new options in dealing with trustees who fail to comply with the strict regulations relating to SMSFs.
Current powers, already used by the ATO, include the ability to:
- Make an SMSF non-complying;
- Apply to a court for civil penalties to be imposed;
- Apply to a court for criminal penalties for more serious contraventions of the law;
- Issue an enforceable undertaking in relation to a contravention; and
- Disqualify a trustee of an SMSF.
In addition to these penalties, the ATO will now yield three additional new powers, which can be applied individually or in addition to other penalties:
- Rectification directions;
- Education directions; and
- Administrative penalties.
- A rectification direction will require the trustee of an SMSF to undertake a specified action to rectify a contravention, within a specified time frame. Failure to comply will attract a financial penalty (currently $1,700).
- Unlike other penalties, a rectification direction cannot be given where the ATO has already accepted an enforceable undertaking in relation to a particular contravention.
- An education direction will require the trustee of an SMSF to undertake a specified education course of education, within a specified timeframe. Again, failure to comply will attract a financial penalty (again $1,700). The trustee of an SMSF cannot pay for, or reimburse, any costs associated with the course from the assets of the SMSF.
- After completing the course, the trustee must also provide evidence of their compliance, and sign a new trustee declaration confirming they understand their duties as a trustee (within 21 days of completing the course).
- Administrative penalties represent the most significant addition to the ATO's powers.
- These penalties will apply to specific contraventions and will result in the trustee of an SMSF being personally liable to pay a financial penalty ranging from $850 to $10,200. The amount of the penalty will depend on which provision of the SIS Act has been contravened.
Importantly, no costs of an administrative penalty can be paid for, or reimbursed from, the assets of the SMSF.
- These new provisions underline the importance of complying with the strict regulations relating to SMSF's.
Accordingly, if you are considering any significant transaction in relation to your superannuation affairs (including contributing to or withdrawing from your SMSF) you should discuss the potential implications with your Goodwin Chivas & Co advisor on 02 9899 3044 before proceeding.