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New ATO Penalties mean more likely cash fines!

Historically, the ATO only had extremely harsh penalties in the form of Trustee Disqualification, or rendering a Fund Non-Compliant and imposing the loss of all tax benefits.  Because the “time” far outweighed most crimes, the ATO rarely took these courses of action.

However from 1 July, the ATO will be providing either “education” or “rectification” directions along with fines for tardy responses, as well as raft of explicit Administrative Penalties carrying significant cash fines to be met by the Trustees themselves, rather than the Fund.

An “Education Direction”, as the name suggests, will likely be used for first time offenders and requires the Trustee to better understand their obligations via the completion of an ATO designated course or program. The Trustee must then complete the course and notify the ATO appropriately (via a SMSF Trustee Declaration Form), or incur a fine of $1,700 and an $850 administrative penalty.

A “Rectification Direction” refers to an ATO instruction to remedy the breach.  Where the Trustee cannot or does not provide evidence of the rectification, the fine is $1,700 for each breach.

Further Administrative Penalties are also on offer ranging from $850 up to $10,200 for each contravention!  The proposed table of penalties are detailed as follows:

Section and Rule

Proposed Penalty

s35B – failure to prepare Financial Statements

$1,700

s65 – prohibition on lending or providing financial assistance to members and their relatives

$10,200

s67 – prohibition on super fund borrowing, except as permitted (LRBA)

$10,200

s84 – contravention of In-House Asset rules

$10,200

s103(1) & (2) – failing to keep trustee minutes for at least 10 years

$1,700

s103(2A) – failure to maintain a s71E election, where applicable, in relation to a fund with an investment in a pre-11/8/99 related unit trust

$1,700

s104 – failing to keep records of change of trustees for at least 10 years

$1,700

s104A – failing to sign Trustee Declaration within 21 days of appointment and keeping for at least 10 years

$1,700

s105 – failing to keep member reports for 10 years

$1,700

s106 – failing to notify ATO of an event that has significant adverse effect on the fund’s financial position

$10,200

s106A – failing to notify ATO of change of status of SMSF, eg. fund ceasing to be a SMSF

$3400

S124 – where an Investment Manager is appointed, failing to make the appointment in writing

$850

s160 – failing to comply with ATO Education directive

$850

s254(1) – failing to provide the Regulator with information on the approved form within the prescribed time upon establishment of the fund

$850

S347A(5) – failing to complete a form with requested information provided by the Regulator as part of the Regulator’s Statistical Program

$850

 The way the legislation is written penalty amounts will be issued to each trustee of an SMSF.  For Corporate Trustees, this will mean that one penalty will be issued, with all directors jointly and severally liable.  Where Individual Members exist, technically the penalty may be imposed on each trustee.

The bottom line

With ASIC now monitoring Auditor capability and compliance, the pressure is on all Auditors to report any imperfections with financial reporting and fund activities.  These penalties now also mean that Auditor calls cannot be ignored.

It all makes for more reasons to make the most of Greenlight’s expertise and technological innovation.  Ask us for a Greenlight Online demonstration today or talk to us about how our specialists can help you steer clear of any ATO penalties!

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