ATO Q&A: Admin Penalties, Rectification & Education Directions

ATO - SMSF Admin Penalties, Rectification Directions, Education DirectionsThe ATO has posted a video of the recent webinars for superannuation professionals covering the new powers the ATO has been given to punish non-compliance with the SIS Act.

The ATO has also published answers to some of the questions raised by participants in the webinars:

  • Ignorance of the rules by a trustee will not prevent the ATO from imposing a penalty
  • Admin penalties will only be applied once per contravention “even if the contravention spanned more than one year”
  • Generally where there are multiple contraventions from a single action, the Q&A uses the example of a in-house asset over 5% loan to members, there will only be one admin penalty
  • Where a penalty provision has been contravened the ATO will impose a penalty “in all cases”, but it may be remitted – partially or fully
  • For individual trustees the fine will be imposed on each trustee separately
  • For corporate trustees it is up to the directors to decide how they split the fine, though they are “jointly and severally liable to pay the penalty”
  • The ATO may decide to remit, in part or in full, a penalty for some trustees but not others, depending on the situation
  • Generally admin penalties will be imposed on trustees of the fund at the time of the contravention, not new trustees
  • The ATO has a number of options to recover unpaid penalties, including
    • Payment arrangements
    • Withholding from tax refunds
    • Legal proceedings

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New course approved for ATO Education Direction

ATO Education Direction course

The ATO has approved a second course as meeting the requirements of an Education Direction. This new power granted to the ATO allows notices to be issued to trustees requiring them to undertake a course of education about the obligations of an SMSF trustee and provide evidence of completion to the ATO. This power is one of several new options the ATO has to encourage compliance with the SIS act and regulations.

The course approved is one that was already freely available online to SMSF trustees to learn about their obligations –, which is a joint venture between the accounting bodies CPA and ICAA.

According to the smsftrustee website:

“At the completion of this program, trustees will be able to understand:

  • their roles and responsibilities within a SMSF

  • the investment restrictions imposed on trustees of a SMSF

  • the rules and limitations surrounding contributions and benefit payments within a SMSF

  • the administration involved with a SMSF

  • At the conclusion of the training program, on successful completion of a small quiz, a certificate of attainment will be provided”

The first course approved was the ATOs webinar Self-managed super funds for trustees – an overview.

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Growing support against LISC repeal

Parliament MRRT Low Income Superannuation Contribution (LISC) repealThe Government is making a second attempt to pass a repeal of the Low Income Superannuation Contribution (LISC) through the Parliament, as support for the LISC grows.

Introduced by the previous Labor Government the LISC offsets contributions tax for low income earners, up to a limit of $500.  If the bill is passed in its present form the LISC will only operate for the 2012/13 financial year.

The LISC repeal is contained, among other measures, in the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 [No. 2], which passed the House of Reps last week and will likely be making its way to the Senate next week. The first attempt to repeal the LISC was in the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013, which was blocked by the Senate in March.

Speaking to the Parliament about the bill Steven Ciobo, Parliamentary Secretary to the Treasurer, said:

“Schedule 7 of the bill abolishes the Low Income Superannuation Contribution (LISC). The bill ensures that the LISC is not payable in respect of concessional contributions made on or after 1 July 2013.

The government will revisit concessional contribution caps and incentives for lower income earners once the budget is back in a strong surplus.

Low- to middle-income earners may be eligible for the superannuation co-contribution to boost their retirement savings.

The removal of the low income superannuation contribution will improve the budget position by $2.7 billion in cash terms by 30 June 2017


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Current State of Superannuation Changes – EOFY 2013/14

Superannuation Changes

An update of superannuation changes at the end of the 2013/14 financial year, including the current state of superannuation changes passed, working their way through parliament, or un-legislated.

Superannuation Changes 2014 – June


Temporary Budget Repair Levy

The following superannuation-related bills to implement the Budget Repair Levy have passed both houses:

Protection for anticipation of certain discontinued announcements

Following a Treasury consultation the Tax and Superannuation Laws Amendment (2014 Measures No. 2) Bill 2014 has passed both houses of Parliament, pending Asset. The bill gives effect to protections for announced but un-enacted tax and superannuation changes.

Read More »Current State of Superannuation Changes – EOFY 2013/14

Early access to super: ‘fee’ included in assessable income

AAT - Early Access to SuperannuationThe Administrative Appeals Tribunal (AAT) has released another decision which shows that it does not pay to participate in superannuation early access schemes.

The decision of Vuong and Commissioner of Taxation [2014] AATA 402 (23 June 2014) following the ATO disallowed two objections by the taxpayer in relation to an early access scheme they participated in, including a significant ‘fee’ paid to the promoter.

Summary of the facts:

  • The taxpayer was aged 49 in 2008
  • He was a member of a large APRA fund
  • In 2008 he was referred by colleagues to a person who offered to help him access his super
  • The fee for this ‘service’ would be 29% of the balance
  • It appears that the taxpayer did not properly understand that this was not allowed
  • Rollover forms were submitted to the APRA fund, and as a result $114,697.23 was deposited into a bank account not controlled by the taxpayer
  • The 29% fee was taken, and the remaining $81,434 transferred to the taxpayer
  • Questions were raised by the taxpayer’s tax agent, and the tax return for the relevant year was lodged, with the intention of amending it when the facts were known
  • In 2011 the ATO audited the taxpayer, and included the full $114,697.23 in his assessable income, resulting in a tax shortfall of $45,298.64.
  • The ATO also imposed  a shortfall interest charge of $2,896.46.
  • The ATO later imposed an  administrative penalty of $11,324.65 – 25% of the shortfall
  • The taxpayer lodged two objections – one over the imposition of the administrative penalty and the other over the wish to claim the 29% ‘fee’ as a tax deduction
  • Both these objections were disallowed by the ATO, and then appealed to the AAT

Early Access Super included in Assessable Income?

Section 6.1 of the ITAA 1997 includes in Assessable Income amounts that are not Ordinary Income, called Statutory Income. Section 304.10, also of the ITAA 97, includes in Assessable Income the amount of a Superannuation Benefit if, among other things, the taxpayer receives a benefit from a complying superannuation fund where the benefit was received “otherwise than in accordance with payment standards prescribed under subsection 31(1) of the Superannuation Industry (Supervision) Act 1993″ unless the Commissioner “satisfied that it is unreasonable that it be included”. Section 307.15(2) of the ITAA 97 also provides that:

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Get ready for SuperStream says ATO to SMSFs & employers

ATO - SuperStreamThe ATO has encouraged both SMSFs and employers to get ready for SuperStream.

SuperStream creates a new standard for employers to transmit data about superannuation contributions to super funds, including both SMSFs and APRA funds.

SuperStream for SMSFs

“Put simply, SuperStream will make the transfer from employer to the SMSF easier and quicker” said Mr Philip Hind, ATO’s National Program Manager, Data Standards & E-Commerce (SuperStream). Over the long term the ATO expects SuperStream to reduce the amount of paperwork for trustees, while providing electronic records for accounting and tax obligations.

Employers will start using SuperStream from 1 July 2014 and the “number of employers using SuperStream is anticipated to steadily increase over coming months” . Therefor the ATO says SMSF trustees should check with employers to find out when they are going to start sending contributions data via SuperStream so the SMSFs can “ensure they have all their details at least 60 days before the planned start date”. Mr Hind also said that it only takes a “matter of minutes” to sign up with an SMSF Messaging Provider, and it is a “once-off event”. The SMSF messaging provider gives an SMSF access to an Electronic Service Address (ESA) and is available “at low or no cost”.

Though at this state the “ATO is emphasising education and support for employers and the SMSF industry during the introduction of SuperStream” Mr Hind said that “SMSF trustees should not delay getting ready”.

The ATO includes the following items on the checklist for employees with an SMSF:

  • Check with your employer about when they will start using SuperStream to send contributions data
  • Check that your employer has all the details required about your SMSF “at least 60 days before their planned start date”
  • Provide your employer with your SMSF’s ABN, ESA – Electronic Service Address and bank details

You can find the full checklist on the ATOs website.

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The Cooper Review & SMSFs – 2 years on

Cooper ReviewIt is now over two years since the Cooper Review, or to give its full name – the Super System Review, was handed down – which seems like a good time to revisit the recommendations made, which have been implemented and which are not proceeding.

In all the Cooper Review made 29 recommendations relating to SMSFs, the following is a para-phrasing of these recommendations, with notes about the changes that have been made since 2010. Quotes are taken either from the Cooper Review, the Governments initial response or the more detailed responses after the consultation process.

Summary of Cooper Review Recommendations:

8.1 – No change to the maximum number of SMSF members

There has been no change to the number of SMSF members allowed.

8.2 – ATO to be given power to issue admin penalties

The ATO has been given the power to issue Admin Penalties.

8.3 – ATO to be given power direct people to rectify contraventions

The ATO has been given the power to issue Rectification Directions.

8.4 – ATO to be given power to require trustees undertake education

The ATO has been given the power to issue Education Directions.

8.5 – ATO to be given power to issue binding SMSF rulings

As this recommendation was rejected by the Government at the time there has not been legislation to empower the ATO to make binding SMSF rulings.

Read More »The Cooper Review & SMSFs – 2 years on