The ATO was looking to achieve positive outcomes from SMSF contraventions rather than reasons to mete out punishment, according to a superannuation specialist legal firm.
“The ATO has stated that it is looking to work with funds rather than point the finger with a ‘got you’ call,” Townsends Business and Corporate Lawyers said.
“Funds willing to rectify the breach and cooperate with the ATO are more likely to have a positive outcome.
“The ATO has said that if they are satisfied, they may close the relevant auditor contravention case with no penalties applied.”
However, Townsends warned if SMSF trustees did not show an intention to cooperate with the regulator, that forgiving attitude could evaporate rapidly, resulting in an unsavoury situation.
“The ATO says if the trustee doesn’t cooperate fully, then it will have no choice but to escalate the matter to a full audit of the fund,” the legal specialist said.
“It’s important to note that every breach uncovered under these comprehensive audits will have penalties applied in full.
“Once an ATO audit is started it cannot be stopped.”
Townsends emphasised cooperation alone would not be enough and SMSF trustees needed to show they were informed about their responsibilities and the situation of their funds.
An indication of a lack of knowledge from the SMSF trustees would encourage the ATO to pursue further action against the fund that could result in the trustees being directed to undertake additional education or worse still being disqualified, the law firm said.
Most importantly, Townsends said trustees had to be mindful that when contacted by the regulator they had to be able to demonstrate they had a plan to rectify the contravention or had in fact already remedied the breach in question.
This is because the trustees and any advisers involved would be aware of the problem as they would have been notified of the auditor contravention report by the fund’s auditor.
Townsends stressed trustees and advises need not panic if contacted by the regulator in those circumstances, but needed to recognise the process in play and act accordingly.
