As you may aware the parliament has passed the new penalty regime for Self-managed Superannuation Fund (SMSF). Under the new legislation, ATO will gain the power to issue on the spot fines, directly and personally, to SMSF trustees using a range of penalties to match the seriousness if an offence.
The new regime also increases the penalty unit from $110 to $170, or increased by 55%. ATO has indicated that each reported offence will automatically generate a penalty notice on each trustee.
This will put individual trustees to a disadvantage situation compare to a corporate trustee, as each trustee will bear the fines individually.
For example, a contravention report is reported to ATO due to lending money to a member or a relative (a serious breach of section 65(1)). This will attract a fine of 60 penalty points, or $10,200 (60 x $170).
If the trustee is a corporate trustee, then only the company will get the fine of $10,200. On the other hand, if the fund is individual trustees with 3 members, then each member may get a fine of $10,200, or a total fine of $30,600.
Trustee(s) may apply to waive the fines. ATO may waive or reduce the penalty based on past history and seriousness of breach. ATO also may order the trustee(s) to:
• Rectification direction (sec. 159) – a written order by ATO to trustees to correct their wrong-doing within specified time period. For example, ATO may direct trustees to sell their property (if they were not prepared to this voluntarily).
• Education direction (sec. 160) – a written order to trustees to attend a specified course of education within a specified time period.
Below is some penalty guidance that may be imposed by ATO:
|Section||Description||Penalty Units||Penalty of each trustee|
|160(4)||Failure to comply with Tax Office education direction||5||$850.00|
|124(1)||Failure to appoint an investment manager in writing when one is appointed||5||$850.00|
|254(1)||Failure to provide information to regulator on approved form||5||$850.00|
|347A(5)||Failure to complete a form with requested information as part of ATO’s survey||5||$850.00|
|35B||Failure to prepare financial statements||10||$1,700.00|
|103(1) & (2)||Failure to keep trustee minutes for at least 10 years||10||$1,700.00|
|104 (1)||Failure to keep records of change of trustees for at least 10 years||10||$1,700.00|
|34 (1)||Failure to follow prescribed standards||20||$3,400.00|
|106A(1)||Written notice to ATO if ceasing to be an SMSF||20||$3,400.00|
|65(1)||Fund must not lend to member/relative||60||$10,200.00|
|67(1)||Fund must not borrow, unless exemption applies||60||$10,200.00|
|84(1)||Fund must not breach in-house asset rules||60||$10,200.00|
|106(1)||Failure to notify ATO of significant adverse events immediately||60||$10,200.00|