ATO Education Direction
The ATO has added two new education courses to the approved list for SMSF education directions.
The ATOs webinar Self-managed super funds for trustees – an overview is also an approved course for the education direction.
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 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 – smsftrustee.com, 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.
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
As of the 18th of March 2014 the Tax and Superannuation Laws Amendment (2014 Measures No. 1) Act 2014 received Royal Assent, which gives the ATO new powers in it’s role as regulator of SMSFs to:
- Issue Rectification Directions
- Issue Education Directions
- Issue Administrative Penalties
These new powers will apply from 1 July 2014. The act also sets penalties for Early Access Scheme promoters, which will apply from the date of Royal Assent, among other non-superannuation tax changes.