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New SMSF Penalty Regime

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The new penalty regime for SMSF trustees will now proceed according to a recent announcement. The new laws will give the ATO power to issue a range of penalties to trustees of SMSF that breach the superannuation laws from 1 July 2014.

The new measures means ATO will now have greater flexibility on dealing with SMSF non-compliance by issuing:

- Rectification directions for contraventions of the superannuation law

- Education directions to trustees of the SMSF

- An Administrative penalty regime for SMSF trustees for certain contraventions of the SISA.

A rectification direction will require a trustee to undertake specified course of education within a specified time frame, and provide the ATO with evidence of successful completion of the course.

Where an administrative penalty is imposed it must be paid personally by the trustee or the director of the trustee company and cannot be paid or reimbursed by the SMSF. Where a SMSF has individual trustees, the ATO will impose any penalty on each individual trustee, meaning the penalty will be multiplied by the number of trustees. Corporate trustees, however, will incur only 1 penalty.

Summary of the proposed penalty:

SISA Section

Rule

Administrative Penalty

s35B Failure to prepare Financial Statements $1,700
s65 Lending or providing financial assistance to members & their relatives $10,200
s67 Super fund borrowings, outside the permitted exemptions (e.g. limited recourse borrowing arrangement) $10,200
s84 Trustees have not taken reasonable steps to comply with the In House Asset Restrictions $10,200
s.103(1) & (2) Failing to keep trustee minutes for at least 10 years $1,700
s.104 Failing to keep records of change of trustees for at least 10 years $1,700
s.104A Failing to sign Trustee Declaration within 21 days of appointment and keeping for at least 10 years $1,700
s.105 Failing to keep member reports for 10 years $1,700
s.106 Failing to notify ATO of an event that has significant adverse effect on the super fund’s financial position $10,200
s.106A Failing to notify ATO of change of status of SMSF, e.g. super fund ceasing to be a SMSF $3,400
s.160 Failing to comply with ATO Education directive $850
s.254(1) Failing to provide the Regulator with information on the approved form within the prescribed time upon establishment of the super fund $850
s.347A(5) Failing to complete a form with requested information provided by the Regulator as part of the Regulator’s Statistical Program $850

 

If you have any questions on SMSF, please contact us on 1300 736 453.

 

Article Disclaimer: This information should not be considered personal financial advice as it is intended to provide general advice only. The article has been prepared by Superhelp Australia Pty Ltd without taking into account your personal objectives, financial situations or needs. 
 
The information contained in the article may not be appropriate to your individual needs therefore you should seek personal financial advice before making any financial or investment decisions. 

 

Tougher Rules for non-lodgement of SMSF annual returns

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The Australian Taxation Office will take a tougher stance on the non-lodgement of SMSF annual returns.

SMSFs which have two years or more of overdue lodgements will have their regulation details removed from Super Fund Lookup. ATO will keep the regulation details off Super Fund Lookup until an SMSF’s lodgements are up to date and that will potentially affect rollovers and employer contributions. APRA funds generally will not proceed with rollover benefits to an SMSF that has had it regulation details removed from the register. Also, most employers use Super Fund Lookup before making contributions to an SMSF.

ATO has emphasised that no matter the quality of the advisor or tax agent, SMSF trustees need to recognise that they themselves are the ones who are responsible for their fund.

 

Article Disclaimer: This information should not be considered personal financial advice as it is intended to provide general advice only. The article has been prepared by Superhelp Australia Pty Ltd without taking into account your personal objectives, financial situations or needs. 
 
The information contained in the article may not be appropriate to your individual needs therefore you should seek personal financial advice before making any financial or investment decisions. 

 

ATO clarifies minimum shortfall rules for pensions

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Have you met the minimum pension payment for the financial year?

In the Draft Taxation Ruling 2010/D3 the ATO proposed a position that if a superannuation fund did not meet the minimum pension payments for a member in a given year, then the fund could not treat that member balance amount to be in pension phase from the beginning of the financial year and thus not claim exemption on the fund earnings in respect of that account balance.

The first key point is that the position of a shortfall, meaning the pension does not exist for the whole financial year, still applies. Importantly the ATO has specified that in certain circumstances it is possible to “catch up” the shortfall and not lose the pension status.

The key elements of this “discretion” are:

  • The shortfall is less than 1/12 of the minimum payment for the year, in effect one months payment (a good reason to set up periodic pension payments rather than make ad hoc payments)
  • it occurred due to an honest mistake or matters beyond the trustees control
  • The shortfall is rectified within 28 days of becoming aware of the shortfall. This means the shortfall may be paid in the next financial year or allocated from pension payments in the next financial year
  • it is treated as if it was made in the correct year in terms of all other matters such the accounts, member balances, tax return and reporting

A final aspect is that it is possible for a SMSF to self assess this discretion but only once. If a shortfall happens again then written relief from the ATO must be sought.

If discretion is not given then:

  • the pension does not exist, and the balance would need to be merged with any existing accumulation account in the fund for that member from the start of the financial year,
  • no earnings tax exemption would be granted in respect of the assets relating to that member balance, and
  • any payments made will not be treated as pension payments but lump sum amounts (this could be an issue if the pension was a transition to retirement pension as the member may not meet a lump sum condition of release)

How Superhelp can Help

If you have any questions in relation your SMSF and Pensions, please call SuperHelp on 1300 736 453.

 

Article Disclaimer: This information should not be considered personal financial advice as it is intended to provide general advice only. The article has been prepared by Superhelp Australia Pty Ltd without taking into account your personal objectives, financial situations or needs. 
 
The information contained in the article may not be appropriate to your individual needs therefore you should seek personal financial advice before making any financial or investment decisions.