Civil Penalty Provisions in the SIS Act for super funds

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Civil Penalty Provisions, SMSFs, superannuation funds, SIS Act, Superannuation Industry (Supervision) Act 1993, section 193, section 196The Civil Penalty Provision are specific sections of the SIS Act which, if contravened, mean a court can impose a monetary penalty.

Section 196 of the Superannuation Industry (Supervision) Act 1993 allows a Court to impose a penalty where “the Court is satisfied that a person has contravened a civil penalty provision…”

However the Court “is not to make an order [for a Civil Penalty]… unless it is satisfied that the contravention is a serious one”.

Each contravention of any of the Civil Penalty Provisions can result in penalty of up to a maximum of 2,000 penalty units. At the current Federal Penalty Unit rate of $180, this equals a maximum Civil Penalty of $360,000 per contravention.

Under section 197 “an application for a civil penalty order may only be made by the Regulator or a person to whom the Regulator has delegated the power to make applications for civil penalty orders.” Section 198 says “an application for a civil penalty order may be made within 6 years after the contravention.”

Under section 193 of the SIS Act, the Civil Penalty Provisions are:

  • 62(1) – the Sole Purpose Test
  • 65(1) – prohibition on lending to members
  • 67(1) – borrowing restrictions
  • 68B(1) – promotion of illegal early release schemes
  • 84(1) – In-house asset rules must be complied with
  • 85(1) – prohibition on in-house asset rules avoidance schemes
  • 95(1) – borrowing – Approved Deposit Funds
  • 97(1) – borrowing – pooled superannuation trust
  • 98 – lending to unit-holders prohibited – pooled superannuation trust
  • 106(1) – duty to notify the Regulator of significant adverse events
  • 109(1) – investments of superannuation entity to be made and maintained on arm’s length basis
  • 109(1A) – dealing with another party not at arm’s length
  •  117(3) – circumstances in which amounts may be paid out of an employer-sponsored fund to an employer-sponsor
  • 242M(1) – contravention of section 242K or 242L (additional obligations of a trustee/corporate trustee in relation to an eligible rollover fund)
  • 388 – transfer to MySuper products
  • 394 – moving amounts held in existing ERFs

Also note that the Civil Penalty Provisions are one avenue for compensation for losses for SMSF members.

Some court decisions involving the Civil Penalty Provisions include:

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