ATO New Penalty Powers

An update from the ATO has confirmed that the proposed new penalty regime will proceed.

On 14 December 2013 the government announced that it will proceed with law changes that give the ATO greater powers in dealing with SMSF trustees who breach super law.

It is proposed that these new powers will apply to contraventions occurring from 1 July 2014 and cover:

  • Administrative penalties
  • Education directions
  • Rectification directions

They will also apply to contraventions that were made prior to 1 July 2014 and continue after that date.

For example, if your fund has lent money to a member or relative and the loan still exists on or after 1 July 2014 you will be liable for a penalty. The loan should immediately be repaid to the fund with appropriate commercial interest.

Under the proposed measures, penalties will vary according to the type of breach. In the example above, each individual trustee will be personally liable for a penalty of $10,200.

For an SMSF with a corporate trustee each director will be jointly and severally liable for a penalty of $10,200.

The penalty cannot be paid using the resources of the SMSF and doing so would be considered a serious breach likely subject to more significant penalties from the ATO.

Under the proposed administrative penalties the ATO must impose the penalty when they become aware of a relevant breach from 1 July 2014. To avoid these penalties make sure your SMSF is fully compliant with the super laws so that you don’t become liable for a penalty or other sanctions.

If trustees are making progress in resolving contravention(s) by 1 July 2014 the ATO would consider these circumstances in any request to remit any imposed administrative penalties.

Contact us if you have questions about the new ATO penalty.