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Trustees warned on compliance penalties

SMSF auditors would need to remain vigilant when reporting contraventions and ensure trustees understood how these would be dealt with according to the new penalty regime the Australian Taxation Office (ATO) introduced this financial year.

“The reality is that if the contravention is still uncorrected on 1 July 2014, it will flick into the new penalty regime,” Super Sphere director Belinda Aisbett told delegates at the 2015 SMSF Association National Conference in Melbourne today.

“So [trustees] still can be caught, even though it may be a historical issue that the fund has in place.

“If the ATO undertakes an audit and they identify a contravention … by law, they have to actually issue the penalty.”

To ensure clients were up to speed on the new penalty regime, Aisbett highlighted some of the more common issues that tripped up clients.

They included lending to members, borrowing contraventions, in-house asset contraventions, a change of trustees and directors, and non-compliance with regulations.

“Borrowing is a common problem for my clients,” she said.

“Not because they borrow money to go and do things they’re not supposed to, but it’s just like all the rest of us – the bank account goes into overdraft every now and again.”

At present, reporting thresholds dictated that SMSF auditors needed to report clients for nominal amount overdrafts, a measure Aisbett said she hoped would be revised in the future.

“If we get some better reporting thresholds around those minor contraventions, you don’t want a client getting a $10,000 fine because the bank account went into overdraft a couple of times through the life of the fund,” she said.

ATO director SMSF income tax and regulatory programs, superannuation Nathan Burgess, who presented in conjunction with Aisbett, said the tax office was in discussions with groups, including the SMSF Association, about the threshold for reporting nominal amounts.

“We’re in some active discussions right now about how to make that a bit more practical,” Burgess said.

“We don’t want to waste our time or the client’s time.

“We want people to get on to what this is all about, which is saving for retirement.”

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