On 1 July 2014 the ATO was provided with extra powers for dealing with SMSF trustees.   The purpose was to give it new ways to deal with non-compliance in SMSF's.

There are three levels:

An Education directive -

To attend an education course to improve a trustee's knowledge of their role and obligations, and reduce the risk of re-offending.   The approved course is an online course run by the CPA.   There is a penalty of $850 if the trustee does not complete the course.

A Rectification directive -

This is a formal direction to rectify issues identified either by the ATO or the auditor.   The ATO is required to consider the financial detriment, the nature and seriousness of the contravention, and other circumstances as appropriate.   If the matter is not rectified within the set timeframe, the fine is $1,700 per trustee.

Administrative Penalties -

Special financial penalties can now be imposed on each trustee, and the fines must not be paid out of the Fund.   Some of the most serious breaches have fines of $10,200 per trustee, for example:

  - loans to members or relatives

- in-house assets (an investment in a related party; a loan to a related party; a lease of an SMSF asset to a related party)

- duty to notify significant adverse events.

Other breaches with fines from $1,700 to $3,400 per trustee include:

- failure to keep proper records and minutes

- not retaining member reports

- breaching operating standards

The ATO can remit penalties , taking into account the trustees actions, past compliance, legitimate mistakes, etc.

The ATO has recently said it will carefully review 2014 auditor reports, and some Funds may be selected for audit based on the SMSF annual return, monitoring of transactions, and information   obtained (Big Brother!).

In our preparation of financials, and reports this year , we will pay special attention to these matters and work with the Fund auditors to resolve any matters before they require reporting.   Also, please check with us anytime the Fund might be planning 'something unusual'.