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ATO, Compliance

Early advice lowers ATO penalty risk

SMSF trustees ATO penalties

Trustees who seek professional advice when considering uncommon SMSF transactions are more likely to avoid costly ATO penalties, an SMSF expert says.

Trustees can avoid potentially harsh ATO penalties by enlisting the help of their advisers before undertaking transactions they are unfamiliar with, according to an SMSF expert.

BDO Australia superannuation manager Yvette Cree said frequent changes to superannuation legislation meant trustees were more likely to make accidental errors with the management of their SMSF, with most mistakes going unnoticed until the end of the financial year.

“It is essential for SMSF trustees to understand how the ATO are dealing with non-compliance and breaches, and proactively work with their advisers to prevent errors in the first instance or at least rectify issues as soon as possible because the ATO can impose some severe directions and penalties on SMSF trustees for easily-made errors,” Cree said in a blog post on the BDO Australia website.

She pointed to the ATO’s courses of action for dealing with SMSF trustees’ non-compliance with super laws, ranging from an education direction to more severe actions, including trustee disqualification and the freezing of a fund’s assets.

“In our experience at BDO, the most common ATO non-compliance directions are the imposition of administration penalties and requiring the SMSF to wind up,” she said.

She noted there had been a rise in ATO administrative penalties being imposed for breaches of the Superannuation Industry (Supervision) Act 1993, with the highest penalty cost ($12,600) applied to breaches involving lending, borrowing and in-house assets.

Trustees who sought professional advice before going ahead with an uncommon transaction, such as investing in a new asset type, would be more likely to avoid ATO penalties, she added.

“Communicating with your adviser about any changes to the SMSF or unusual transactions may also provide an opportunity that you wouldn’t have otherwise been aware of,” she said.

She recommended trustees contact their advisers as soon as possible in the event of making a mistake, such as an incorrect deposit or withdrawal involving their fund’s bank account, overdrawing the fund’s bank account or purchasing an asset in the incorrect name.

“We have also found that engaging with the ATO as soon as possible and working through issues with an ATO case officer has provided a better outcome for SMSF trustees and the fund,” she said.

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