Owners of Self Managed Superannuation Funds need to be aware that as from July 1st 2014 a range of new penalties were introduced that are directed at SMSF trustees who fail to properly adhere to the super rules.
Until 30 June 2014, the Australian Tax Office’s primary means of penalising SMSF trustees had been via a penalty tax.
The changes give the ATO the power to impose a new list of administrative penalties that range from 5 penalty units up to 60 penalty units.
Each penalty unit equates to $170 so if an SMSF trustee failed to sign an SMSF trustee declaration, he or she could be fined 10 penalty units – $1700.
If the trustees of a 2-member fund failed to prepare financial statements for the fund the 2 trustees could be fined $1700 each.
The maximum administrative penalty for a single breach is $10,200, and such a fine would apply where, for example, an SMSF trustee breached the borrowing rules, or the in-house asset rules.
The full list of penalties are set out in Schedule 2 of the Tax and Superannuation Laws Amendment Act 2014 (Measures No 1).
The ATO will have the power to force specific contraventions to be rectified via a ‘rectification direction’ that will require a specified action to rectify the contravention within a specified time frame and provide the Regulator with evidence of the person’s compliance with direction.
It’s worth noting that the change of system means a trustee’s fine can only be paid from personal assets – not from the fund.
The ATO can give trustees an ‘education direction’ requiring a person to undertake a specified approved course of education within a specified time frame. The person receiving the direction would have to provide the Regulator with evidence of completion of the course and to sign, or re-sign the SMSF trustee declaration confirming understanding of obligations and duties as a trustee.