ATO releases Division 293 caution

Division 293 Self-managed superannuation ATO SMSF Release authority

SMSF trustees must follow ATO procedures before paying a Division 293 liability with monies from their superannuation funds or risk breaching their compliance obligations.

The ATO has reminded SMSF trustees with a Division 293 tax liability to ensure they follow the correct procedure when electing to pay the liability from their superannuation funds as failure to do so could result in penalties for illegal early access.

The regulator issued the notice on its website late last week as it prepares to send out Division 293 assessment notices to fund members with an annual combined income and contributions exceeding the threshold of $250,000 after they submit their personal and SMSF annual returns.

Trustees can choose to pay the liability from either their personal funds or those of their SMSF, but retirement savings can only be accessed to pay the tax after making an election to release the monies and then receiving an authority from the ATO to do so.

To that end, trustees should not rush to immediately pay the liability from their SMSF as soon as they receive the notice of assessment from the ATO and ensure the prescribed process is followed as the consequences of non-compliance can be severe.

“Once your member has made their election, we will send you a release authority through your SMSF messaging provider. If you don’t have a messaging provider, you will receive a paper form,” the ATO stated.

“Once you have actioned the release authority, you are required to pay us the amount. We will then use this amount to pay the Division 293 liability. Any remaining amount is offset against other debts before being paid to your member.

“If you release funds prior to receiving a release authority, a contravention will occur and you may be liable for penalties. In this event you should consider submitting a voluntary disclosure form.”

Parts of the SMSF sector have raised concerns regarding the difficulties many trustees encounter in settling their Division 293 liabilities as individuals have a 60-day window to request monies from their superannuation funds to settle debts, but the payment itself must be made within 21 days of the notice of assessment.

The SMSF Association has advised its members to consider using their personal bank account to settle the liability as the ATO will typically refund any monies released from a superannuation fund if the debt is cleared before the funds are received.

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