A new Penalty Regime for SMSFs will apply for contraventions that occur on or after 1 July 2014.

The new measures will provide the ATO, as the Regulator of SMSFs, with greater flexibility when dealing with a fund’s non-compliance with the law.

Where an administrative penalty is imposed it must be paid personally by the trustee or the director of the trustee company and cannot be paid or reimbursed by the SMSF.

The new penalties are substantial as indicated in the table below.

Section & Rule

Administrative Penalty

s.35B – failure to prepare Financial Statements $1,700
s.65 – prohibition on lending or providing financial assistance to members & their relatives $10,200
s.67 – prohibition on super fund borrowing, except as permitted, eg limited recourse borrowing arrangement $10,200
s.84 – contravention of In-House Asset rules $10,200
s.103(1) & (2) – failing to keep trustee minutes for at least 10 years $1,700
s.103(2A) – failure to maintain a s.71E election, where applicable, in relation to a fund with an investment in a pre 11/8/99 related unit trust $1,700
s.104 – failing to keep records of change of trustees for at least 10 years $1,700
s.104A – failing to sign Trustee Declaration within 21 days of appointment and keeping for at least 10 years $1,700
s.105 – failing to keep member reports for 10 years $1,700
s.106 – failing to notify ATO of an event that has significant adverse effect on the fund’s financial position $10,200
s.106A – failing to notify ATO of change of status of SMSF, eg fund ceasing to be a SMSF $3,400
s.124 – where an Investment Manager is appointed, failing to make the appointment in writing $850
s.160 – failing to comply with ATO Education directive $850
s.254(1) – Failing to provide the Regulator with information on the approved form within the prescribed time upon establishment of the fund $850
s.347A(5) – Failing to complete a form with requested information provided by the Regulator as part of the Regulator’s Statistical Program $850

To ensure that your SMSF is structured and administered correctly please contact Peter Quinn by submitting an online enquiry or calling us on +61 2 9580 9166 to book an obligation free appointment.

The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.