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ATO, Superannuation

Good behaviour will not cancel penalties

good behaviour SMSF penalties

The ATO will look favourably on well-behaved SMSF trustees, but they should not expect to get off scot-free when breaches occur, an SMSF expert has warned.

SMSF advisers and trustees should not assume recently released guidelines related to penalties for breaches will mean fewer penalties will be applied, but rather the ATO may not impose multiple penalties for multiple breaches stemming from a single action.

Deloitte national SMSF leader Liz Westover said the Practice Statement Law Administration (PSLA) 2020/3 guidelines, which detail how ATO case officers can apply and remit penalties for breaches by trustees, left scope for remissions, but these were not automatic.

“The PSLA gives unfettered discretion to remit all, part or none of the penalties when breaches occur by trustees,” Westover said during the Chartered Accountants Australia and New Zealand (CAANZ) National SMSF Conference Online 2020 today.

She noted ATO case officers would make their decisions based on the attitude and behaviour of trustees in recognising and rectifying the breach, but good behaviour would not completely remove any penalties.

“It [the PSLA] did clarify what would happen with multiple contraventions as a result of one course of action, and they would be looking at the primary breach as the one on which to impose a penalty and secondary breaches are the ones they were likely to remit,” she said.

“I would not assume that anyone will get penalties remitted in full even where they have got good behaviour, or the breach is a one-off, and people are cooperating.

“We still have to convey to clients that a penalty is likely, but will not be as extreme as the ATO may otherwise have been able to impose if it had gone the whole gamut and not remitted any penalties.”

She said the ATO’s SMSF Voluntary Disclosure Service may also help trustees avoid high penalties, but they need to be open, honest and realistic when approaching the regulator.

“Let them know what has happened, give them sensible proposals around rectification and be realistic about what you are asking for,” she said.

“Keep them informed and don’t wait to the last minute to tell them of any delays in rectification and generally you can get a good outcome.”

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