The new law initiates administrative directions and penalties for contravention in reference to SMSFs including:
- Rectification directions
- Education directions
- Administrative penalties
The ATO has the ability to issue not just one, but two or more, of the above options and can issue a notice of non-compliance if SMSFs do not act in accordance with directives.
Funds that no longer meet the requirements of an SMSF may still be subject to directions and/or penalties, regardless to the fact that the new penalty regime applies only to SMSFs.
This new law voids any condition in the SMSF’s Trust Deed/Governing Rules that would have the effect of excusing a trustee of the SMSF from or indemnifying a trustee/director against:
- Liability for the cost of undertaking a course of education in compliance with an education directive.
- Liability for an administrative penalty imposed by the new administrative penalty regime.
The new SMSF Penalty Regime does not replace the current powers that the ATO has to take action against trustee(s), but provides an alternative. Providing a middle ground of the current option, for the ATO when dealing with a fund that contravened SIS, is one of the main reasons for the introduction of SMSF Penalty Regime.
ATO has developed a range of options to deal with breaches of the superannuation law, including:
- Giving a fund a notice of non-compliance to make the fund a non-complying superannuation fund
- Accept an undertaking from the trustee to rectify the contravention
- Disqualifying individual trustees and prohibiting them from acting as a trustee of a superannuation fund or as a responsible officer of a corporate trustee of a superannuation fund
- Suspend or remove the trustee
- Freeze the assets of the fund if there is a risk of the member’s benefits being eroded
- Seek civil and/or criminal penalties through courts
The ATO will continue to have these options available for SMSFs that contravene SIS, however, the new SMSF Penalty Regime will provide a more efficient way for the ATO to deal with SMSFs that have SIS breaches.
Credit to ‘New Penalty Regime for SMSFs’ by Mark Ellem of SuperMate.