Admin penalties fail to reduce disqualifications: CFS
Recent data suggests that the introduction of the ATO new penalty regime last year has done little to reduce SMSF trustee disqualifications, says Colonial First State (CFS).
CFS executive manager Craig Day told SMSF Adviser that despite the ATO’s ability to issue administrative penalties, rectification directions or education directions, the number of individual SMSF trustee disqualifications increased again for the 2014-15 financial year.
SMSF Adviser reported back in July that the ATO had disqualified over 600 trustees, with the official figure from the ATO showing 663 individual SMSF trustee disqualifications.
The penalty regime powers were first introduced in March last year and were designed to give the ATO alternative options to simply making the SMSF a non-complying fund, disqualifying the trustee, applying to the court for a civil penalty or requiring the trustee to enter an enforceable undertaking.
Mr Day said that in the past couple of years the rate of individual SMSF trustee disqualifications has steadily been rising, with the number of disqualifications being 295 in 2011-12, 440 in 2012-13, 585 in 2013-14 and then 663 in the past financial year.
“Even with the new administrative powers, the ATO still seem to be very much favouring disqualifying trustees,” he said.
“So even though they’ve introduced the new administrative penalties, it doesn’t seem to have impacted the number of trustees that they’ve disqualified.”
Mr Day said while 663 is obviously still a very small number, given there are now more than one million SMSF trustees, there has been a pattern within which the number of disqualifications has consistently increased.
“The introduction of the new administrative penalties, rectification directions and education directions hasn’t tempered their willingness to disqualify trustees,” he said.
Mr Day did point out, however, it was difficult to say whether this could be partly due to the greater surveillance of auditors or the ATO applying tougher tests for trustees.