Corrective actions can head off ATO penalties

SMSF trustees may avoid ATO penalties by rectifying any issues that have breached superannuation law and providing evidence of that work, a financial services lawyer has claimed.

Argyle Lawyers managing principal Peter Bobbin said the key actions SMSF trustees and their advisers should take when a fund was likely to be penalised by the ATO was to engage in as much rectification work as possible and to offer a complete solution that removes the need for the regulator to act.

“Take early action, but that does not mean contacting the ATO first. Rather, package a fully rectified solution to supply to the ATO for its sign-off,” Bobbin suggested.

Highlighting a recent case undertaken by Argyle Lawyers, he said a fully rectified solution presented to the ATO was met with a response that “approved” the rectification proposal and would require “no further action”.

“The mistake that many people make is to ask the ATO to form a view, and if you ask it to form a view, they will ‘tax it’ and only when it is challenged will it reconsider that view,” he noted.

Referencing the recent case, he added the package laid out a solution to the extent the ATO did not have to comment and enabled it to not have to take any further action.

He noted while the ATO had a range of enforcement actions available, administrative penalties against SMSF trustees only totalled $1.74 million in 2018, adding “you have got to be pretty bad to get hit with a penalty from the ATO”.

“I generally find people in the SMSF area to be genuinely cooperative, concerned and willing to assist, and you would have to act in a continuous and intentional manner relating to an SMSF before being hit by the ATO,” he said.

Accountants and advisers should also avoid blaming other professionals who may have been involved with an SMSF in the past as such actions could have a negative impact on an SMSF trustee, he added.

“It highlights a blameworthy action to the ATO, which attributes the actions of a tax agent to the taxpayer,” he said.

“Blaming a past professional is blaming the client and that does not change any of the problems the client may currently be facing,” he added, noting cases of professional misconduct should not be overlooked.

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