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Hewison Private Wealth - Insights
Hewison Insights
Self-Managed Super Fund
Australian Tax Office (ATO)
Government legislation

Changes to Superannuation Trustee Penalties

Chris Morcom
Partner/Private Client Adviser
28 Apr 2014

As a trustee of a self-managed super fund (SMSF), you might be wondering what all the noise is about regarding incoming government legislation and what its impact will be on trustees.

The legislation has been referred to as “Speeding Ticket” legislation and will allow the Australian Tax Office (ATO) to apply remediation directions and administrative penalties on SMSF trustees. The new legislation will apply from 1 July 2014, but can also apply to breaches in previous financial years where the breach continues after this date.

A remediation direction can be of two sorts:
1. A rectification direction – requiring the SMSF trustee to fix a compliance breach
2. An education direction – requiring the SMSF trustee to undertake prescribed educational courses.

Administrative penalties will apply to SMSF trustees where there is a breach of the Superannuation Industry (Supervision) Act (SIS Act) prescribed standards, or failure to prepare the required SMSF financial statements.

So why has the government introduced this legislation?

Prior to this legislation, the ATO has had only four options when it discovered an SMSF in breach of SIS standards:

1. Make the SMSF non-complying;
2. Apply to the court for civil penalties on the trustees;
3. Accept an enforceable undertaking from the trustees; or,
4. Disqualify the trustees.

These powers are relatively inflexible and disproportionate for administrative breaches.

Furthermore, they certainly do not provide a climate for SMSF trustees to notify the ATO of breaches and actively fix them.

The new administrative penalties apply to all trustees of the fund, and trustees cannot be recompensed from SMSF assets. In the case of a corporate trustee, the directors of that company are jointly and severally liable for the penalty. In the case of individual trustees, each individual trustee would receive a penalty. This is a good incentive for all SMSFs to have a corporate trustee.

There are seventeen SIS Act provisions that have been listed with penalties applying for breaches.

Breaches are mandatorily reportable to the ATO by the fund auditor, and the ATO has signalled it will be following up every breach noticed lodged by auditors in the coming year.
The main listed provisions and the maximum penalties for contravention are set out in the table below:

Note: The current value of a penalty unit is prescribed in s4AA of the Crimes Act 1914

Given the administrative matters outlined above, it is important all SMSF trustees have  detailed records to remain compliant with legislative requirements.

Hewison Private Wealth has actively managed and maintained detailed client records for the past 25 years, with many of our clients operating SMSFs.  For our clients, the new legislative changes do not change anything, and they can rest assured their records are appropriately and consistently maintained.

If you are concerned about your SMSF or  would like to hear more about our SMSF services, please visit our website at  www.hewison.com.au.  

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.