It can be very expensive for a SMSF trustee or a director of a corporate trustee who fails to adequately fulfil their responsibilities. An administrative penalty can be charged to each of the individual trustees or to a corporate trustee. Also, in some instances it can be charged to individual directors of the corporate trustee.
In addition to imposing administrative penalties, the Australian Taxation Office also has the power to direct trustees to rectify a breach and to undertake trustee education.
The current penalties, which can be seen in the table below, range from $1,110 to $13,320 and are not insignificant. Further, these penalties are levied on the trustee or director personally and cannot be paid by the SMSF.
The ATO may require trustees to take specific action to rectify a breach within a given time frame. The Taxation Office must have regard to the financial detriment from complying with the rectification direction, the nature and seriousness of the breach and any other relevant circumstances.
If trustees do not comply with a rectification direction and provide evidence to the Taxation Office of their compliance, they are liable to a fine of $2,220 for each breach.
The ATO may also require trustees to successfully complete a free, Taxation Office approved, education course within a specific time. If a trustee incurs any expenses in attending the course they are not able to be reimbursed from the assets of the SMSF.
Once an education course has been completed, the trustee must re-sign the trustee declaration form confirming they understand their duties as an SMSF trustee.
If trustees do not complete the education course and notify the Taxation Office, they are liable to a fine of $2,220 and an administrative penalty of $1,110.
Prevention is better than cure
At Saward Dawson, we do our best to ensure that your SMSF is administered efficiently and in compliance with the rules. If you have any questions about what your obligations as a trustee are or the rules applicable to your SMSF then we would be pleased to assist.
See the following table for the penalty amounts that may apply if the rules are broken.
|s34(1)||Failure to comply with the prescribed operating standards||$4,440|
|s35B(1)||Failure to prepare Financial Statements||$2,220|
|s65(1)||Lending or providing financial assistance to members & their relatives||$13,320|
|s67(1)||Super fund borrowings, outside the permitted exemptions (e.g. limited recourse borrowing arrangements)||$13,320|
|s84(1)||Failure to take reasonable steps to comply with the In House Asset rules||$13,320|
|s.103(1) & (2)||Failure to keep trustee minutes and records of decisions for at least 10 years||$2,220|
|s.103(2A)||Failure to maintain a s.71E election, where applicable, in relation to a fund with an investment in a pre-11/8/99 related unit trust||$2,220|
|s.104(1)||Failure to keep records of change of trustees for at least 10 years||$2,220|
|s.104A(2)||Failure to sign the Trustee Declaration within 21 days of appointment and keeping it for at least 10 years||$2,220|
|s.105(1)||Failure to keep member reports for 10 years||$2,220|
|s.106(1)||Failure to notify ATO of an event that has a significant adverse effect on the fund’s financial position||$13,320|
|s.106A(1)||Failure to notify ATO of change of status of SMSF, eg fund ceasing to be a SMSF||$4,440|
|s.124(1)||Where an Investment Manager is appointed, failure to make the appointment in writing||$1,110|
|s.160(4)||Failure to comply with an ATO Education directive||$1,110|
|s.254(1)||Failure to provide the Regulator with information in the approved form within the prescribed time upon establishment of the fund||$1,110|
|s.347A(5)||Failure to complete a form with requested information provided by the Regulator as part of the Regulator’s Statistical Program||$1,110|