‘Unfortunate timing’ with admin penalty increase
Administrative penalties are set to rise next month in line with the consumer price index at a time when many cannot afford the current penalties, warns an industry law firm.
From 1 July 2020, the value of penalty units will increase from $210 to $222 in line with the consumer price index, said DBA Lawyers director Daniel Butler.
Under s 166 of the SISA, the ATO can impose administrative penalties for a number of provisions and usually apply them in multiples. These provisions include:
• s 65(1): Lending to members of regulated superannuation fund: 60 penalty units
• s 67(1): Borrowing: 60 penalty units
• s 84(1): In-house asset rules: 60 penalty units
• s 103(1): Duty to keep minutes: 10 penalty units
• s 104(1): Duty to keep records of change of trustee: 10 penalty units
Mr Butler said it is unfortunate timing that the penalty unit has been increased at a time when “most people can least afford the current penalties”.
“Indeed, the increase from $170 from 30 June 2017 to $222 on 1 July 2020 reflects an overall greater than 30 per cent increase when most people’s incomes, especially businesses, have been flatlined or in more recent times decreasing substantially,” he said.
“Something should be done to put a stop to this indexation which is not reflecting the reality of what’s happening in the real economy and world. This is similar to some lease arrangements that are indexed to CPI when the prevailing market value is much lower than what is in the lease document, and a market review is required to bring the rent back to reality.”
He warned SMSF professionals that given the current COVID-19 environment, it is likely that more and more SMSF trustees and directors will be hit up with admin penalties for accessing super without a valid condition of release to feed their families or seek to prop up their business or livelihoods.
“The ATO will not be that sympathetic to these cases and advisers need to ensure their clients are aware of the serious consequences of not playing by the rules,” he said.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.