ATO warns penalties apply for funds not meeting their release obligations
The ATO has reminded SMSF trustees that funds that do not meet their release authority obligations may incur significant penalties for non-compliance of up to 20 penalty units.
A non-compliance penalty in relation to release authority obligations can be incurred if a trustee does not pay the required amount to the ATO within 10 business days of receiving a valid release authority or does not return the Release Authority Statements within 10 business days.
“Additionally, penalties can be incurred if the trustee does release an amount that is not the lowest amount of the amount stated in the release authority, or the maximum available release amounts for the super interest held by the super fund,” the ATO stated.
The regulator said there are several types of release authorities that fund members can request.
One is the excess concessional contributions release authority, which is used if a member has exceeded their concessional contributions cap and elects to release up to 85 per cent of the excess concessional contributions from their fund.
The released amount must be paid directly to the ATO and is to be treated as a non-assessable, non-exempt benefit payment to the member. Amounts of excess concessional contributions that are not released will be treated as non-concessional contributions.
There is also an excess non-concessional contribution release authority used when a member exceeds their non-concessional contributions cap.
The member has 60 days from the issue date of their determination to elect how the excess amount is to be treated and can either release their excess non-concessional contributions and 85 per cent of the associated earnings from their nominated super fund or choose not to release and be assessed for excess non-concessional contributions tax.
Trustees don’t need to amend the contributions report provided for this member via the Member Account Transaction Service. Releasing this benefit doesn’t change the contributions that led to the excess.
“When a member elects to have their excess non-concessional contributions assessed as excess non-concessional contributions tax they are required to advise the ATO which funds they would like a release authority issued to, and then will be issued a release authority by the ATO to their nominated fund to pay their tax liability,” the ATO stated.
The Division 293 tax due and payable release authority is used for fund members assessed as having a Division 293 tax due and payable debt associated with contributions made to accumulation super accounts.
“Members can elect to release an amount from their fund within 60 days of the issue date to pay the tax debt and will be issued a release authority by the ATO to their nominated funds and have the super fund pay the monies directly,” the regulator stated.
