New rules affecting SMSF trustees from 1 July 2013

SMSF trustees should be made aware of the following changes that are intended to apply from 1 July 2013:

  • the ATO will have the power to issue administrative penalties against SMSF trustees (and directors of corporate trustees);
  • the ATO will have the power to issue relevant persons with a direction to rectify specified contraventions within a specified reasonable time;
  • the ATO will have the power to enforce mandatory education for trustees who have contravened SIS legislation; and
  • amounts illegally early released will be taxed at the superannuation non‑complying tax rate (i.e., currently 46.5%).

Editor: These changes are intended to broaden the actions that the ATO can take against recalcitrant SMSF trustees (and directors of corporate trustees), acknowledging that the existing tools available to address instances of non-compliance are relatively ‘blunt instruments’.

Prior to 1 July 2013, the only tools the ATO had were basically the following (and the new tools are intended to complement these existing tools):

  • making an SMSF non-complying for taxation purposes;
  • applying to a court for civil penalties to be imposed (a person may also face criminal penalties for more serious breaches of the law);
  • accepting an enforceable undertaking in relation to a contravention; and
  • disqualifying a trustee of an SMSF.

Note that:

  • at the time of writing, these measures were contained in the Superannuation Legislation Amendment (Reducing Illegal Early Release and Other Measures) Bill 2012, which had not been passed byParliament; and
  • the planned imposition of new requirements for SMSFs acquiring or disposing of assets with related parties, which were due to also commence from 1 July 2013, appear to have been put on hold as the relevant provisions were removed from the Tax and Superannuation Laws Amendment (2013 Measures No 1) Bill 2013.