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New ATO Superannuation Fund Penalty Regime from 1 July 2014    

As many of you may be aware, new ATO penalties will apply for Self Managed Superannuation Fund (SMSF) breaches from 1 July 2014.
These breaches include:

  • SMSF bank accounts going into overdraft
  • failure to get financial statements and income tax returns prepared and lodged
  • providing loans to family members from your SMSF
  • investments being made into in-house assets which are not solely for the SMSF
  • SMSF assets not being separated from personal assets
  • taking money from the SMSF to cover living expenses
  • incorrect borrowing structures being established for the purchase of assets by a SMSF

Previously, if trustees breached the rules, the ATO could declare the fund non-complying and subject the fund to a 45 percent tax on the value of assets.

From 1 July 2014 the ATO will have the power to penalise the fund without declaring it non-compliant, depending on the type of breach that is involved.

It is important to note that any penalties cannot be paid for or reimbursed from assets of the fund – they will be payable by the trustee personally.  Another point to note is that the penalty is imposed on each trustee.  Where a fund has individual trustees, the penalty will be charged to each individual trustee.  For funds with a corporate trustee, the penalty is only imposed once.

The table below sets out  a summary of some of the estimated penalties:



Requirement to prepare financial statements


Requirement to keep records


Operating standards e.g. contributions and preservation rules


Prohibition on lending money to relatives


Prohibition on trustees borrowing


Requirements to comply with in-house asset rules


The ATO can still, in addition to penalties, declare the fund non-compliant. This change however, provides the ATO with a variety of enforcement options at their disposal.

The penalty that will apply will ultimately depend on the nature and severity of the fund breach.

Please contact one of our team if you have any questions regarding the above information

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