While the ATO’s new SMSF penalty regime is potentially “dangerous” for SMSF trustees, one lawyer has predicted the way the penalties play out may be different from what the legislation suggests.
Speaking to SMSF Adviser, DBA Lawyers’ David Oon explained the legislative wording that creates the SMSF penalty regime allows for very strict operations.
However, statements from the ATO have hinted that there may be a softer approach taken for trustees who do not show intentional disregard for their regulatory obligations.
“[The legislation] doesn’t say the ATO has discretion as to whether or not to enforce it, but I think practically, they just do,” Mr Oon said. “If they don’t want to enforce it, they just don’t send you the bill.”
Mr Oon pointed to statements such as those made by assistant deputy commissioner, superannuation, Stuart Forsyth, who said administration penalties will only be a concern where there are serious contraventions.
“As long as trustees take care to rectify in a timely manner penalties are unlikely to be an issue,” Mr Forsyth had said.
However, Mr Oon stressed that statements such as these are non-binding, and that the ATO has the power to “push it to the Nth degree”.
Speaking at the 8th Annual SMSF Adviser Strategy Day in Sydney last week, AMP SMSF’s Peter Burgess questioned how the ATO will use its new powers in conjunction with those that the regulator already has.
“For example, if you breach the in-house asset rules, under the new penalties that would be a $10,200 admin penalty, but it’s also a breach of the civil penalty provisions, which is a $340,000 maximum,” he said.
Mr Burgess also said it is “conceivable” that some SMSF trustees may be better off being made non-complying rather than being subject to the new administrative penalties.
He also reminded delegates that a breach reported by an auditor does not necessarily result in a penalty, because the penalty will only apply if the ATO audits a fund.
The ATO will, in the main, only audit high-risk funds, Mr Burgess said. Trustees can be kept out of the high-risk category by, for example, rectifying a breach as soon as possible, he said.
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