SMSF trustees or members that have breached rules relating to the operation of their fund should consider proactively drafting an enforceable undertaking to take to the ATO rather than waiting for its officers to provide a rectification direction, according to a legal firm.
DBA Lawyers senior associate Shaun Backhaus said Practice Statement Law Administration 2023/1, released in early April, describes the directions for when the regulator will take action on contraventions and instructs ATO officers on how to apply the law in certain situations.
“The ATO has lots of compliance measures to deal with SMSFs and one of them is giving a rectification direction, which is a written notice to tell you – within a stated period – to take specified actions to rectify a contravention and provide evidence of that within that time,” Backhaus said during a recent webinar.
“These rectifications talk about preventative measures as well as any corrective action, but enforceable takings are probably going to be better.
“The difference with a rectification direction is that an undertaking is something you can draft yourself and negotiate with the commissioner and get that signed.
“As such, you have more input and the ability to have involvement in what the directions are to fix this and the wording used can be worth a lot.
“I would say try the enforceable undertaking route if you can, but get it in earlier before other things happen.
“It will probably serve you well, whereas the rectification direction will be something the ATO officer will make themselves and they don’t need you to agree to it, so enforceable takings, from my view, are better in that respect.”
