ATO plans to introduce education directions for SMSF trustees who have breached superannuation laws need refining so the guidance is more proportional and consistent in its application, according to the SMSF Association.
The industry body made the claim in its submission to a consultation on draft Practice Statement Law Administration (PSLA) 2025/D2 SMSF – education directions for contraventions of the Superannuation Industry (Supervision) (SIS) Act 1993, in which it called for changes as to when a direction was issued.
While it supported the ATO’s intention to use directions to lift the capabilities and compliance of trustees, the association noted they could be applied to minor or inadvertent breaches and create disproportionate outcomes, but could be avoided where an issue had been rectified.
“Introduce a minimum materiality threshold to ensure directions are reserved for matters where mandated education is genuinely warranted. For minor or inadvertent breaches, voluntary education may be encouraged instead of a direction,” the submission stated.
Following on from this approach, the association also stated the regulator should not view an auditor contravention report (ACR) as the sole indicator of a compliance breach.
“The draft PSLA suggests the ATO may form a reasonable belief of a contravention based on an ACR,” it said.
“An ACR reflects the auditor’s assessment at a point in time and may not capture context, such as genuine grey-area technical interpretation.
“Before issuing an education direction on the basis of an ACR, undertake at least a light-touch ATO review or trustee engagement to confirm facts and ensure procedural fairness, avoiding premature action.”
The industry body did find areas of agreement with the ATO in the draft PSLA, noting an education direction could not be issued to someone who was no longer a trustee/director.
In this case, it proposed a delayed action where a former trustee involved in a contravention had resigned and avoided any education requirements only to re-enter the system with another SMSF at a later time.
“Implement system safeguards to identify individuals linked to prior contraventions if they seek to re-enter the SMSF system. This would support appropriate risk profiling of new trustees, helping maintain the integrity of the SMSF sector,” the submission added.
Where a trustee had already received an education direction, it noted the draft PSLA did not recommend the issuing of further directions, but this did not consider the circumstances between the two directions.
“Several years may have elapsed since a prior direction, during which regulatory settings may have changed significantly [and] alternatively a subsequent breach may be minor or unrelated to the original issue,” the association stated.
“Retain ATO discretion to issue a second education direction where it is the fair, proportionate and educative response, rather than defaulting to stronger compliance action.”
