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Crucial for trustees to know responsibilities

Financial advisory firm William Buck has warned it is more important than ever for SMSF trustees to understand and adhere to their legal obligations so as not to incur significant fines in the wake of the new compliance penalty regime that will come into effect on 1 July.

To illustrate its point, the advisory firm said it estimated trustees could have incurred fines of up to $100 million based on the auditor contravention reports lodged last year.

William Buck director Anna Carrabs said there had been much confusion surrounding SMSFs in addition to an enormous amount of publicity.

“In many cases trustees don’t understand the strict rules governing these funds, which may not be appropriate for their circumstances,” Carrabs said.

“Investors need to understand the full responsibilities that they are taking on once they decide to establish a SMSF and the associated demands as a trustee. The do-it-yourself label associated with SMSFs lures investors into a false sense of security due to the perception that it is easy to manage. This is far from the case.”

Of the 18,000 SMSF contraventions lodged in the last financial year, around 50 per cent could have incurred the fine based on the new penalty.

The maximum penalty that can be charged by the Australian Taxation Office (ATO) for a contravention is $10,200 and multiple penalties could apply to a fund for the one contravention.

The main areas the regulator is focusing on include related-party loans, in-house assets, proper separation of assets, improper use of funds and incorrect borrowing structures.

“It is the trustee’s responsibility to understand what obligations are required to comply with the ATO’s super laws. If a trustee does not have the skillset, independent advice needs to be obtained to ensure penalty fees are not incurred,” Carrabs said.

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