Neal Dallas, director at businessDEPOT Legal, said that even before contacting the Australian Taxation Office (ATO) over a contravention, SMSF trustees should already have formulated a rectification plan.
Speaking at the SMSF Association National Conference, Dallas said that although not all the details need to have been finalised, the plan should be comprehensive enough to allow the ATO to see that the trustee has acknowledged the mistake and is willing to put in place steps to avoid future compliance issues.
“Part of the reason for starting to formulate the plan before contacting the ATO is that it can take time. The other thing is, if anyone’s gone through this disclosure process, you’ll put your application in and it will be six to eight weeks before the ATO even acknowledges that they’ve received it,” he said.
“Then it might be months after that before they start engaging with you, saying, ‘Yes, we accept that or we want more information’. In that six to eight weeks, plus a month, you can start formulating that program and start submitting further material to the ATO about the details.”
Dallas said getting a plan formulated earlier also means trustees can take control of the narrative more successfully.
“You give bad luck a chance if you delay. As soon as the ATO issues you with a notice that they’re doing a review, you’ve lost your opportunity to control the narrative,” he said.
“[A plan] effectively acts as a placeholder to acknowledge that you’ve uncovered these breaches and will be coming to the ATO in the fullness of time with more information. It then gives you an opportunity before a review commences to actually get your plan together.”
Victoria Mercer, an associate at businessDEPOT Legal, said family law proceedings present a good opportunity to make voluntary disclosures.
“There are two reasons for this. The first reason is that the breaches may have a material impact on the asset pool, so if there’s been really serious non-compliance, and the parties believe a notice of non-compliance could be issued or there’s going to be hefty admin penalties, you’ve got to take that into account,” Mercer said.
“This is more important if the breach has been caused by one particular party. You want those losses attributed to their share of the matrimonial assets.”
The second reason, she said, is that the parties can’t actually move on from each other until they’ve “come clean”.
“For example, I’m dealing with a client who wants to roll out of an SMSF into her own fund. I have told her that there are breaches that [have not been] detected yet because she hasn’t lodged her annual returns, and they are really serious,” Mercer said.
“[I’ve indicated] that if she rolls into her own SMSF and these breaches get uncovered, and we don’t deal with this now, she will get disqualified, and that’s going to impact her ability to run her own fund in the future.”
