New ATO Penalties (Fines) for Self-Managed Super Funds
The ATO has introduced new penalty powers which it can impose on you if your fund breaks certain superannuation rules.
The new rules apply from 1 July this year and allow the ATO to fine you and require you to rectify the mistake that has been made. They can also direct you to take further education on self-managed superannuation funds if they are not satisfied you understand your role as trustee of your self-managed fund.
There are three types of new penalties that can be imposed:
- A direction to undertake, at your expense, an education course to improve your knowledge of self-managed superannuation funds,
- Rectify any breaches of the superannuation rules that your fund has not complied with, and
- An administrative penalty for breaching the superannuation rules. The fines range from $850 for minor administrative matters through to $10,200 for more serious matters such as breaches of the rules about the fund’s investments.
Any fines that are levied apply to all individuals who are fund trustees. For example, if you have more than one trustee the penalty can apply to each individual trustee, which could be up to 4 times the standard penalty. However, if you have a company as the trustee of your self-managed fund only one penalty is imposed and all the directors of the trustee will be held jointly and severally liable to pay the fine. The fine is not permitted to be paid from the money in the fund and must come from the company trustee or the personal resources of the company’s directors or individual trustees.
The new penalty powers that the ATO has are in addition to all of the current penalties that can be applied. This includes disqualifying the trustees, treating the fund as non-complying or imposing an enforceable undertaking to require the trustees to correct a breach. Whether a penalty is imposed by the ATO depends on the seriousness of the breach.
Education directions will require a trustee to undertake a course to improve their superannuation knowledge. This will most likely occur where it is a first time contravention and the trustees were not aware of the rules. Directions to correct a breach of the superannuation rules will depend on the circumstances. Things that can be taken into account will include the particular superannuation rule that has been breached, the nature of the contravention, whether the breach has occurred in the past and the value of the breach relative to the size of the fund.
When the superannuation legislation has been breached the ATO can impose a penalty which is imposed at the full rate. For example, if the fund breaches the rules for lending, borrowing or related party investments the penalty is $10,200 for each breach. If the breaches relate to reporting or keeping records about the fund then a fine of $850, $1,700 or $3,400 can be imposed.
The ATO does have power to remit a penalty which will depend on a range of factors including previous breaches of the rules, the likelihood of breaches occurring in future and whether the trustees have been reckless or incompetent in the operation of the fund. Each case is judged on its merits and there is no one determining factor.
It is your responsibility to ensure that the superannuation fund meets the rules at all times. You may rely on your accountant, financial advisor, auditor or other professional to help your fund comply with the rules. However, if they identify a breach you should ensure, if at all possible, that it is corrected or the likelihood of it occurring in future is eliminated.
Rectify any outstanding contraventions made by your SMSF
These penalties not only apply to new contraventions which occurred on or after 1 July 2014, they are also imposed on existing contraventions that cannot be rectified by 1 July 2014.
How can we help?
If you have any doubts or questions that your fund may have fallen foul of the rules or you are not sure of the rules before the fund receives contributions, pays benefits or makes investments, please feel free to give me a call to arrange a time to meet so that we can discuss their impact on your particular circumstances or alternatively contact your Fund accountant.
Just another reminder, you need to ensure that you do not exceed the contributions caps. If you are making a non-concessional contribution, check that the non-concessional contributions made during the previous two (2) financial years are reviewed so that the two year bring forward provision has not been triggered in an earlier year. If it has it will affect the amount you can contribute in the current financial year.
The contribution caps for the current financial year about to end (i.e. 1 July 2013 to 30 June 2014) are:
|Contribution type||Age of the member||Contribution cap|
|Concessional contribution||Under age 59 on 30 June 2013||$25,000|
|Concessional contribution||Aged 59 or over on 30 June 2013||$35,000|
|Non-concessional contribution||All ages||$150,000|
Also, remember contributions are counted in the year that they are received so ensure any contributions you plan to go into your Fund this financial year are received no later than 30 June. A delay due to an issue with the bank won’t help you; the ATO doesn’t permit back dating.
Division 293 Tax for high income earners
The ATO is issuing Division 293 assessments which relate to taxpayers who have been subject to the additional contributions tax of 15% on the non-excessive portion of their concessional contributions. This additional tax is assessed under Division 293 of the Income Tax Assessment Act 1997 and applies only to super members whose adjusted income (including the non-excessive portion of their concessional super contributions) exceeds $300,000. Division 293 tax is imposed on that part of concessional contributions which cause the adjusted income to exceed $300,000. Super members who have received Division 293 assessments can pay the assessed tax themselves or have their superannuation fund pay the tax for them (and debiting their super interest with the payment). If the superannuation fund is to pay the tax the trustee must be provided with a “release authority” which is issued by the ATO. The super member will receive a release authority with their notice of assessment for Division 293 tax. If the taxpayer gives the release authority to the trustee, the trustee has 30 days in which to pay the specified amount to the ATO. The ATO will then treat the assessment as having been paid.
SMSF Supervisory Levy for 2013-14
The Supervisory Levy for current SMSFs (those established before the 2014 financial year) is $388.
While the standard SMSF supervisory levy is $259, the ATO has – over two years with 2013/14 being the second of the two years – changed the payment basis of the levy from being in arrears to being in advance. The supervisory levy for the 2014 financial year is the standard levy of $259 plus 50% of the levy which has been brought forward – resulting in a total levy of $388 (after rounding up).
The two year phase-in of the bring forward of the levy will be completed by 1 July 2014.
The Supervisory Levy for new SMSFs – those established during the 2014 financial year – is $518 (being $259 for the 2014 financial year and an advance payment of $259 in respect of 2014- 2015).
The Supervisory Levy for 2014-15 will revert to the standard levy of $259.
Annual Return due dates for the 2013-14 Year just ending
The due date for lodgement of an SMSF annual return by a registered tax agent (with some exceptions) and payment (if required) will be 15 May 2015. Earlier dates apply in some circumstances. Check with your Fund accountant or the ATO website.
For an SMSF which was established during the 2014 financial year, the due date for lodgement of their annual return is 31 October 2014 if the SMSF has not appointed a tax agent or 28 February 2015 if the SMSF has appointed a tax agent.
ATO Educational Videos
The ATO has produced several useful videos which are posted on YouTube.
SMSF Annual Obligations:
SMSF Sole Purpose Test:
This document is not advice and provides information only. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.