The ATO penalty scheme, which allows for the imposition of multiple SMSF administrative penalties, is likely to encourage non-compliance among trustees and may even create undue financial hardship, according to an SMSF audit expert.
ASF Audits technical services executive general manager Shelly Banton said: “The anecdotal evidence suggests that SMSF penalties are being applied hard and fast by the ATO, and not just for a single contravention of the Superannuation Industry (Supervision) (SIS) Act 1993.
“At first glance, this may appear to be reasonable and in line with the punishment meted out to a criminal in a court of law, but it quickly becomes apparent how multiple penalties will drive the behaviour of trustees towards greater non-compliance.”
In a blog post on the ASF Audits website, Banton noted the current administrative penalty for the illegal early access of super had created a situation where trustees were more likely to try and access a larger amount of super without meeting a condition of release than they would have done previously.
“A penalty scheme of this nature will fuel the practice of SMSF trustees accessing more significant amounts from their SMSFs than otherwise required to avoid the imposition of multiple penalties,” she said.
She pointed out the ATO’s current approach might also result in an in trustees being saddled with penalties which were beyond their ability to repay in their individual capacity outside of superannuation.
“There’s no doubt that SMSF trustees who are doing the wrong thing should bear the full brunt of the SIS law. But imposing multiple penalties out of reach of mum and dad SMSF trustees may be the financial turning point for them and their families,” she added.
“The starting point should be to ensure that the application of SMSF administrative penalties does not cause unintended or unjust results to SMSF trustees in their personal capacity.”
Data released by the ATO in November revealed the regulator had experienced a $1.4 million increase in administrative penalties collected in the 2019 financial year.
