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Check breach occurred before self-reporting

breach reporting

SMSF trustees should be certain a breach, and not a disagreement between members, has occurred before any voluntary disclosure to the ATO.

While the ATO has invited SMSFs to use its early engagement and voluntary disclosure service, an actuarial certificate provider has recommended fund trustees first consider whether a contravention has taken place and if it has already been reported before using the facility.

Accurium said the service should only be used where there had been a clear contravention of the Superannuation Industry (Supervision) (SIS) Act or Regulations that had not been rectified, but fund trustees needed to be certain a breach had actually occurred.

“Sometimes it may not be entirely clear if this is the case, for example, the fund trustees may disagree with each other or the trustees may disagree with the SMSF professionals helping to administer the fund about whether a regulatory contravention has occurred,” the firm said in a recent blog update.

“If there is disagreement as to whether there has been a legislative contravention, then the SMSF should first confirm either by obtaining SMSF-specific advice from the ATO or seeking an independent legal opinion from a superannuation lawyer.”

However, Accurium head of education Mark Ellem said the service should not be used to assess whether a breach has occurred.

“If you’re unsure of whether there is a regulatory contravention or not, [you won’t be] using this service to work out or to confirm whether there is a breach or not,” Ellem said during a recent webinar.

“[This is a service to be used] where you’re sure you’ve got a breach of the regulatory provisions of the SIS Act or Regulations [and the circumstance is] not under review by the ATO [or] hasn’t been reported by the auditor.”

The blog emphasised Ellem’s point, noting the service should only be used when a contravention had not been reported to the ATO.

“If the fund is already undergoing an audit as a result of the contravention, then the early disclosure service cannot be used,” it said.

“Even if an audit has not yet been commenced, if the fund auditor has already reported the contravention, then once again the ATO is aware of the situation and no voluntary disclosure can be made.”

Accurium noted that while an audit may bring issues to the attention of the ATO, any matter that has been raised through the early engagement and voluntary disclosure service still needed to be addressed during the fund audit.

“Even if a regulatory breach has occurred and been disclosed under the early engagement and voluntary disclosure service, the SMSF auditor must still report the contravention,” it said.

“However, as long as the issue is currently in the process of being resolved based on the disclosure, then the ATO will not commence an audit unless additional information comes to light which was not part of the original voluntary disclosure.”

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