SMSF trustees need to review their funds to determine if there are any current compliance issues that require addressing before having a heavy personal penalty imposed upon them under the new regime to be introduced on 1 July, according to a specialist superannuation law firm.
“If the proposed new regime comes into effect, the ATO (Australian Taxation Office) will be able to impose administrative penalties on trustees which cannot be paid for or reimbursed from assets of the fund, meaning the trustees will have to pay the fine out of their own pocket,” Townsends Business and Corporate Lawyers said.
“The proposed new regime will also allow the ATO to order trustees to attend compulsory education courses, again at the trustee’s personal expense.”
The proposed fines for compliance breaches range in degree. For example, trustees could be fined $850 for not complying with an ATO education directive, or fined anywhere between $1700 and $3400 for failing to prepare financial statements for the fund.
At the more severe end of the spectrum, a penalty of $10,700 could be imposed on trustees for breaches of the rules around related-party loans and breaches of the in-house asset regulations.
“While of course no breach should be left to languish, if the proposed new penalties take effect, it will be even more vital that trustees ensure they are aware of their responsibilities and rectify any breaches immediately, otherwise they may find themselves with a penalty notice from the ATO,” Townsends said.
The new regime is being introduced to make SMSF administration enforcement simpler, discourage minor and repeated legal infringements and ensure penalties issued to trustees are commensurate with the breach that has occurred.
Until now the ATO has had to impose more rigid penalty measures, such as taking a fund’s tax concessions away or disqualifying the trustees of the fund. These were regarded by the sector as time consuming and too severe for the breaches involved.
