A new range of administrative penalties is now available to the ATO. These penalties can be imposed on self managed fund trustees for of breaches of the law. These can include breaches that are inadvertent and/or accidental. The new penalties are available to the ATO for breaches that occur on or after 1 July 2014.
These new penalties have been designed to allow the ATO to impose a monetary penalty easily on trustees who breach the law. The penalties range from $850 to $10 200, depending on the breach that occurred.
The monetary penalty will apply to the trustee personally and cannot be paid directly from the super fund’s assets.
An example of a breach of the law includes:
- loan to a member of the fund
- super fund borrowing
- breach of prescribed standards
- failure to prepare accounts and statements in a year of income
- failure to keep minutes and records
The new penalties represent a significant change for SMSF trustees. In the past, the ATO’s ability to issue monetary penalties has been restricted due to the severity of the penalties available to them.
The new penalties also increase the risk that trustees will be exposed to financial penalties if a breach of the law should occur. Under these new rules, it is expected that the ATO will adopt a standard practice of first imposing administrative penalties and then requiring trustees to demonstrate that the imposition of the penalty is unwarranted or unjust. It will be the trustee’s responsibility to lodge an objection for a penalty decision to be reviewed.
The new rules will also provide the ATO with:
- the power to issue rectification directions mandating certain actions trustees must take to resolve breaches of the law
- the power to issue education directions requiring trustees to complete specified training/education courses