According to the ATO the three Rs for SMSFs are Responsibility, Related party transactions and Rules. This was the topic of a speech given by Stuart Forsyth, ATO Assistant Deputy Commissioner for Compliance, Strategy, Risk and Delivery, Superannuation to the Australian Investors Association Annual National Conference 2014.
SMSFs mean taking responsibility for your retirement savings. As Mr Forsyth said in the speech “SMSFs are far from ‘do-it-yourself’ or ‘set and forget”, instead they “require significant time, attention and expertise”.
Mr Forsyth asked that people remember the ATO isn’t a prudential regulator. Prudential regulation “governs the conduct of people and institutions in a position of trust over other peoples’ money”, instead SMSF trustees must be “vigilant in protecting their fund’s assets”.
Mr Forsyth highlighted a number of things SMSF trustees need to consider as part of the responsibility of running an SMSF, the first was succession planning – including binding death benefit nominations, reversionary pensions and enduring powers of attorney.
The SMSF deed also needs to be checked, as it should “reflect the requirements of the fund and be tailored to meet the fund’s objectives and the members’ needs”.
Trustees were also encouraged to “consider the advantages of appointing a corporate trustee” as it would likely result in a “smoother succession”.
The 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
The ATO has a number of options available to deal with SMSF compliance breaches:
- Education Directions
- Rectification Directions
- Administrative Penalties
- Enforceable Undertakings
- Allowing an SMSF to wind-up
- Disqualifying Trustees
- Freezing SMSF assets
- Issuing a Notice of Non-Compliance
- Civil and Criminal Penalties