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 |
$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!