Although Part 1 of Practical Compliance Guide 2025/1 is not available to SMSFs, the Tax Office says all superannuation funds, including SMSFs, may rely on this guideline concerning its compliance approach (under Part 2 of the guideline) to funds’ PAYG withholding obligations for income years before the 2019–20 income year.
Part 2 of the PCG will apply for the 2018–19 income year and earlier income years. It will not apply to later income years.
It clarifies in paragraph 307-10(e) that the payment of a financial advice fee is excluded from the definition of a superannuation benefit where the fee is paid at the direction or request of the member and relates to personal advice provided to the member about their interest in the fund. This clarification applies from the 2019–20 income year onwards.
“As a result, there may be situations where financial advice fees meeting these criteria, paid by a fund from their members’ superannuation interests in the 2018–19 and earlier income years, do not benefit from this clarification,” it reads.
“Depending on the nature of the arrangements in place in those years, there may be some circumstances where payments of financial advice fees gave rise to an obligation to withhold under the PAYG withholding regime at the time the fee was paid. There is no time limit for us to impose a penalty for failing to withhold.”
Given the time that has elapsed and the limited retrospective application of paragraph 307-10(e), the ATO would not have cause to apply compliance resources to specifically identify whether any payments of financial advice fees in the 2018–19 and earlier income years should be characterised as superannuation benefits, and consequently if the fund has correctly withheld from payments of advice fees in the 2018–19 and earlier income years.
“Where a failure to withhold from these payments is otherwise identified, for example, as the result of a voluntary disclosure made by a fund, we will generally remit any penalty for failure to withhold unless we have information which suggests it is inappropriate to do so. This transitional PAYG withholding compliance approach applies to all funds, including SMSFs.”
