Tag Archive: audit

  1. New ATO Penalties mean more likely cash fines!

    Comments Off on 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


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


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


    s84 – contravention of In-House Asset rules


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


    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


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


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


    s105 – failing to keep member reports for 10 years


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


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


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


    s160 – failing to comply with ATO Education directive


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


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


     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!

  2. Beware! The ATO’s eyes are open… and they’re on a mission!

    Comments Off on Beware! The ATO’s eyes are open… and they’re on a mission!

    Barbara was on a mission of her own, until the ATO slowed things down markedly for her.  She had decided to use part of her superannuation assets to invest in a Private Company opportunity, and so had engaged Greenlight to set up an SMSF.

    All was on target until she received notice that her brand new SMSF would be one of the 15,100 SMSF establishments this year that would be randomly audited by the ATO (up from 9000 in 2012-13).  That in itself was not a problem, and from our perspective a positive that such action was being taken by the ATO.  A crackdown on unscrupulous operators and spruikers can only be a positive outcome for everyone!

    Fast forward 4 months, and as we sit currently, her fund has been suspended until October 2014, still another 8 months away.  Why?

    As part of the audit, the ATO reviewed all of her personal and business affairs and uncovered overdue personal returns and business lodgements.  She was given 1 month to rectify the outstanding items, and did that.  But while overseas for 5 weeks over the Christmas break, a further request and deadline was missed, and…. Well you know the punch line.

    And the consequences are devastating.  Not only did Barb miss out on the investment opportunity completely, her intended rollovers are now sitting in cash in her incumbent retail fund – earning practically nothing in the current environment.

    Furthermore, she has been forced to rethink her intended investment strategy for the Fund – a distressing outcome for someone who thought they had their retirement future mapped out.

    Needless to say, a lesson for anyone currently setting up a fund, or thinking about it… The house needs to be in order.  Call it a by-product or even unintended consequence of the crack-down, but a stark reminder that the ATO has no tolerance for tardiness or oversight, especially when it comes to who is entitled to run their own SMSF!