Insight Accounting Pty Ltd is a CPA Practice

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New SMSF penalty regime – March 2014

New SMSF penalty regime to kick in on July 1, 2014

Did you know you may have to fork out $10,200 if you lend money to a fellow self-managed superannuation fund (SMSF) member or a relative who is in dire need of some financial assistance? Or $1,700 for a breach as minor as failing to keep adequate records? The countdown is on, with only around four months remaining until the new SMSF administrative penalty regime kicks in on July 1.

If all this sounds familiar, it is because the SMSF penalty regime was essentially a measure that was due to be implemented by the previous federal government on July 1, 2013 but due to inadequate legislative support, the measure was held back. With the new government at the helm however, the measure has been given the nod and looks set to come into effect.

Currently, the Tax Office has a few ways in which it deals with non-complying funds. It can:

  • make an SMSF non-complying for tax purposes, take away its tax concessions and effectively force it to wind-up
  • accept an enforceable undertaking
  • take trustees to court and seek a civil penalty, or
  • disqualify SMSF trustees.

With its new regulatory powers however, the Tax Office will be able to prevent repeat breaches by:

  • issuing trustees with a direction to rectify contraventions within a specified time frame
  • enforcing mandatory education for trustees where there is non-compliance with super law, so that trustees are aware of their obligations (the compulsory education course will be at their own expense), and
  • imposing administrative penalties that will be payable by the trustee, not out of the assets of the SMSF (refer to table below).

It is worth remembering that the new administrative penalty regime will involve a system of penalty points for various breaches – with each penalty point worth $170. The most common penalties for breaches will carry units that range from five units to 60 units, equal to a value of $850 to $10,200. This will be a change from the current system where each penalty unit is only worth $110, meaning the highest fine an SMSF could ever be administered with was $6,600.

What the Tax Office will not do is:

  • issue binding rulings in relation to SMSFs
  • collect data on SMSF borrowing from credit providers (the Tax Office will instead collect data directly from SMSFs as part of its collection and publication of SMSF data)
  • prohibit investment in in-house assets, and

require SMSFs to provide information to members on an annual basis.

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Do ensure your SMSF is up to speed with all its administrative and compliance obligations. Consult this office to familiarize yourself with the new administrative penalties to avoid landing in hot water with the Tax Office.

DISCLAIMER:All information provided in this publication is of a general nature only and is not personal financial or investment advice. It does not take into account your particular objectives and circumstances. No person should act on the basis of this information without first obtaining and following the advice of a suitably qualified professional advisor. To the fullest extent permitted by law, no person involved in producing, distributing or providing the information in this publication (including Taxpayers Australia Incorporated, each of its directors, councilors, employees and contractors and the editors or authors of the information) will be liable in any way for any loss or damage suffered by any person through the use of or access to this information. The Copyright is owned exclusively by Taxpayers Australia Inc (ABN 96 075 950 284).


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