Every day, many Australian business owners register new self managed superannuation funds (SMSF). SMSF is an option that enjoys increasing popularity thanks to the greater freedom and flexibility of investment that it allows. Yet counterbalancing this freedom is a rigorous regulatory framework – one that is set to become even stricter. From 1 July 2015, the ATO has new penalty powers regarding certain breaches of SMSF rules. If you are a current SMSF holder or are considering SMSF as a possible superannuation choice, it is important that you understand the new ATO penalty powers.

BLOG: SMSFs under the spotlight: new ATO penalty powers take effect

All existing superannuation penalties remain in place. Yet now the ATO can impose three additional sorts of penalties. If you breach superannuation rules, you could be directed by the ATO to:

  • Undertake further education in SMSF: the ATO may consider that you do not have adequate understanding of your role as trustee of your SMSF. Where this happens, the ATO can direct you to embark on a SMSF education course. You must bear the expense of this further education. The ATO is most likely to mete out this penalty where this is a first time breach on your behalf and you were not aware of the rules.
  • Put it right: where your SMSF breaches any superannuation rules, the ATO can direct you to correct these. Whether or not you incur this penalty will depend on individual circumstances. Factor like the specific breach, whether your SMSF has previously made the same breach and the value of the breach relative to the size of your SMSF will all be considered.
  • Financial penalty: the ATO has an vast range of fines they can choose to impose, from $850 for minor administrative breaches through to $10,200 for SMSF investment breaches. If your SMSF breaches a superannuation rule, you may attract an administrative penalty relative to the breach.

Do you have more than one trustee of your SMSF? Remember that all levied fines apply to each individual fund trustee. That means the ATO penalty can apply equally to each individual trustee, so your SMSF may be liable for up to four times the standard penalty.

Do you have a company as trustee of your SMSF? Here, only one penalty is imposed and all directors of the trustee will be held jointly and severally liable for payment of the fine. You cannot pay the fine from SMSF fund money. Instead, the fine must be paid from either the company trustee or the personal resources of the company’s directors or individual trustees.

You can request the ATO to remit a penalty. The ATO does have power to do this and will consider each request on its individual merits.

With the great flexibility of an SMSF comes great responsibility. You have much to gain from professional help in keeping your SMSF compliant with superannuation rules. Speak with Ganrid & Associates to get fully abreast of the superannuation rules and how these apply to your individual circumstances.