The cost of doing things wrong is about to go up!

By Tim Miller
(Miller Super Solutions)


1 July 2017 marks a relatively quiet day for SMSFs…in an alternate reality. In this reality not only will the new super world come into effect, it will do so with increased SMSF administrative penalties. For breaches that occur after 1 July 2017, and result in a penalty being imposed, the new penalty rate will be $210 per unit. This amount will apply until 1 July 2020 when further indexation will occur.

Based on statistics annually released by the ATO, the number of SMSFs that have breaches reported usually sits around the 2% mark and of those usually about 50% of breaches are already rectified. In the grand scheme of things, recognising that scheme isn’t the best word to use, this reflects that the SMSF compliance rate is relatively high and the fact that the ATO have indicated only a few hundred funds have been issued with Administrative Penalties indicates that the vast majority of SMSFs who do the wrong thing, whether deliberately or inadvertently, work with the Regulator to get things back on track.

It’s important to identify these penalties exist because a quick perusal of the table below does not really provide the full picture of when penalties can be imposed. Particularly with new rules being implemented from 1 July that relate to the acceptance of contributions and the payment of benefits amongst other things, on first glance these matters escape administrative penalties, however, like many elements of operating an SMSF, they fall under the broader scope of 34(1) and the applicable operating standards.

SIS Section Description Penalty Units Value Pre-July 2017 breaches
34(1) Operating Standards 20 $4,200 $3,600
35B Preparation of Accounts 10 $2,100 $1,800
65(1) Loans to members/relatives 60 $12,600 $10,800
67(1) Borrowing 60 $12,600 $10,800
84(1) In-house asset rules 60 $12,600 $10,800
103(1 & 2 & 2A) Minute retention (10 years) 10 $2,100 $1,800
104(1) Trustee consent and changes 10 $2,100 $1,800
104A(2) Trustee Declaration 10 $2,100 $1,800
105(1) Member statements (10 years) 10 $2,100 $1,800
106(1) Notify ATO of significant events 60 $12,600 $10,800
106A(1) Notify ATO no longer SMSF (21 days) 20 $4,200 $3,600
124(1) Investment manager 5 $1,050 $900
160(4) Education direction 5 $1,050 $900
254(1) Provision of information to ATO 5 $1,050 $900
347A(5) Collection of statistical information 5 $1,050 $900

Of course the easiest way to avoid any penalties being imposed is to ensure you do the right thing. This in itself can be challenging with so much change occurring, but highlights the need to understand the responsibilities of being a trustee and also ensuring those SMSF professionals who you engage are all over the changes.


About the Author:
Miller Super Solutions is the SMSF education & training creation of Tim Miller, assisting SMSF professionals and trustees with the practices associated with establishing, running and ultimately closing down SMSF’s.

General Advice Warning:

The information provided is general in nature and represents the opinion of the author. It does not take into account the objectives, financial situation or needs of any particular person. It is not intended to be and does not constitute financial advice or any other advice.You need to consider your financial situation and needs and should seek professional advice before making any decisions based on this information.

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