ATO, SuperStream

ESA non-disclosure breaches obligations

withheld ESA

SMSF practitioners must disclose the electronic service address of a fund when dealing with the ATO as not doing so will create a breach for their trustee clients.

SMSF practitioners who had purposely withheld an electronic service address (ESA) for a client’s SMSF are breaching the law and opening their client up to penalties of more than $5000, according to an SMSF technical expert.

Heffron head of SMSF technical and education services Lyn Formica said the administrator had received reports that some SMSF accountants had intentionally withheld the ESA for a client’s fund in communications with the ATO so as to receive paper release authorities, rather than receiving them via SuperStream.

“We are seeing cases where a client has a Division 293 tax assessment or excess concessional or non-concessional contributions and have chosen to take some money out of superannuation to pay this additional tax assessment,” Formica said during an online briefing today.

“The ATO sends a release authority, which is the permission ticket for the trustees to release some money out of the fund, and once SuperStream came on online for rollovers, it changed the system for release authorities as well.

“If a client has an ESA that is capable of doing rollovers, then the release authority will come through to their administrator’s SuperStream dashboard, rather than as a paper form.”

She said some practitioners were still trying to receive paper forms because they were not used to SuperStream or struggling with the administrator dashboards.

“Paper forms sound like a good idea if you have a client who will not have rollovers coming in and don’t have third-party employers making contributions via SuperStream, and so you won’t give the ESA to the ATO and not worry about any of those coming by SuperStream,” she said.

“Unfortunately, it doesn’t work that way and if an SMSF has an electronic service address, it must be given to the ATO. If not, the fund trustee is committing an offence [of strict liability],” she said, adding this offence carried 25 penalty units, which at $222 per unit totalled $5550.

She added that an SMSF auditor would be required to notify a trustee in writing that they have done something wrong, and while the auditor would not have to lodge an auditor contravention report, they had the option to report it to the ATO in section G of the annual return.

“Don’t fall into this particular trap. If you have got an ESA, tell the ATO about it and make sure you are keeping that up to date with the ATO,” she said.

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