SMSF practitioners should encourage trustees to use the ATO’s voluntary disclosure service to report an ‘unfixable’ problem with a fund rather than treating it as a hopeless case and waiting for the regulator to address the matter, a technical expert has advised.
Heffron head of SMSF technical and education services Lyn Formica said the ATO has been reminding SMSF trustees regarding the voluntary disclosure of breaches of superannuation law and the potential for having penalties reduced for doing so, but some have been confused as to when they should disclose.
“The first thing to check is has the breach been rectified? If it has, then we’re only looking to voluntarily disclose if we also have a contravention report that is going to be lodged and there’s multiple serious breaches in there,” Formica said during a technical briefing earlier this month.
“The reason we would go down that voluntary disclosure route is it provides an opportunity to put more information in front of the ATO than what a contravention report can do.
“It’s going to allow us to tell our story, explain why the breach took place, what has been done to make sure it never happens again and to say: ‘Please don’t give me an administrative penalty.’
“If the breach hasn’t been rectified, then the question to ask is: ‘Can you fix it?’ If it can be fixed, but we haven’t done it yet, is the trustee willing to fix this breach? If they are, go down the voluntary disclosure path.
“Having said that, if there is a breach that you can’t fix, voluntary disclosure is still an option you can take. You don’t want sit on your hands knowing you can’t fix it and waiting for the ATO to come knocking. Explain why you can’t fix it and why you think there shouldn’t be any penalties.
“Alternatively, if you have a situation where the breach can be fixed, but the trustee is not engaging with the process and is unwilling to do what is necessary to put this fund back in the position it should have been in if the breach hadn’t happened, there’s absolutely no point in doing a voluntary disclosure for this client.
“They’re not going to engage in the rectification process. Just wait till the ATO comes knocking, because voluntary disclosure is for people who are going to rectify their problem.”
