Monday, 5 January 2015

Self Managed Super Funds - trustee penalties

Self managed superannuation funds (SMSFs) are ever on the rise in Australia and with that they are more and more frequently part of family law property settlements.

In 2014 a new administrative penalty regime came into effect giving the Australian Taxation Office (ATO) a wide range of enforcement powers to ensure SMSFs do not breach the relevant superannuation legislation.

The commentary on these changes indicates that the intention is to ensure that trustee's are vigilant in their record keeping and compliant with their duties.

The breaches covered include but are not limited to the provision of financial assistance to a member or relative, the failure to maintain adequate minutes and records and exceeding the in-house asset investment limit.

The new penalties fall into three categories:

  • Administrative penalty notice; 
  • Rectification directions; and
  • Education directions. 

The penalty notices are fines ranging from 5 penalty units (i.e. $850) to 60 penalty units (i.e. $10,200). Penalties are paid by the trustee personally and cannot be reimbursed by the SMSF - and it is important to note that where a SMSF has individual trustees the penalty will be paid by each trustee but where there is a corporate trustee it will only be paid once. The ATO does not have discretion to reduce or withhold the penalty meaning that even inadvertent errors will attract a penalty.

Rectification directions require the trustee to take specified actions to rectify the contraventions and provide the ATO with evidence of compliance within a specified time frame.

Education directions require the trustee to undertake a specified course of education and provide the ATO with evidence of compliance of the course. Any cost for the trustee in undertaking the course is to be paid for by the trustee and cannot be paid for or refunded by the trustee. The trustee will be required to sign a declaration within 21 days of completion of the course stating that they understand their duties as a trustee of a SMSF.

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