Proposed changes to the superannuation law mean that trustees who break the rules may be treated more equitably when it comes to penalties.
The current penalty system for some breaches is cumbersome and out of step with the severity of the breach. The proposals, now in the public arena for consultation and due to take effect on 1 July 2013, have their origins in the Cooper Review that found that the ATO’s options were limited when it came to sanctioning SMSF trustees who failed to comply with the Act.
The SMSF Professionals’ Association of Australia (SPAA) CEO Andrea Slattery has welcomed the proposed legislative changes. “Under the current regime, the ATO has basically three options: the draconian move of making a fund non-compliant for tax purposes, applying to a court to impose civil penalties, or largely turning a blind eye.
“Clearly this situation was unsatisfactory. Making a fund non-compliant could have had the effect of halving the value of the assets – a harsh penalty in most instances – while applying to a court can be time-consuming with no guarantee about the outcome. At the same time trustees should not be able to think they can be non-compliant with impunity.”
Mrs Slattery says the proposed changes have the benefit of giving the ATO greater flexibility so that any penalty imposed is more in tune with the breach of the Act.
“Under the proposed legislation a trustee could face penalties of up to $6,600 for contravening certain aspects of the Act or regulations. “Another option open to the ATO is to require trustees to attend an SMSF educational course about their responsibilities, as well as directing trustees to undertake specified action to rectify a breach of the legislation.”
She says the decision to give the ATO the power to force trustees to attend an educational course was a “positive initiative”.
“It suggests to SPAA that many breaches of the Act are more by accident than design and that by giving trustees additional knowledge about how to comply with the Act is a sensible approach.
“The proposed changes also highlight the need for trustees to get professional advice as the ATO is unlikely to be as forgiving of breaches of the Act in a more flexible compliance regime; ignorance of the law will be no excuse.”