The indexation of compliance penalty units announced in last week’s budget has reinforced the case for SMSFs to have a corporate trustee structure in place, a specialist lawyer has said.
The federal government stipulated administrative penalty units would increase in line with inflation, from $170 to $180 effective 31 July 2015.
This means the most severe compliance breaches such as lending to members and relatives, which attract 60 penalty units, will add up to a liability of $10,800 per SMSF trustee.
The government further confirmed this indexation would occur in line with the consumer price index every three years, with the next adjustment scheduled for 1 July 2018.
DBA Lawyers director Daniel Butler said under the new pricing scale three breaches, worth 60 penalty units each, would cost two individual trustees of one SMSF a total of $64,800.
But if those individuals were directors of a corporate trustee that administered the fund, the penalty units would only be levied once, resulting in a liability of $32,400 – a saving of $32,400.
“When these things happen they typically come in bunches, and the adviser who is not proposing a corporate trustee structure is delinquent because these are not things that won’t happen, these are things that are likely to happen and it’s just a matter of time,” Butler told selfmanagedsuper.
“The example I gave illustrates a $32,400 saving under the new system if you have a corporate trustee, but advisers are saying, ‘we’ll save you the $600 upfront’ for something that might end up costing you $32,400 down the track.”
Furthermore, SMSF trustees unwilling to replace an individual trustee structure with a corporate trustee arrangement due to complication and cost might only be postponing the inevitable, Butler said.
“When a member dies they’ll have to go through a similar process anyway,” he said.
