ATO and SMSF contraventions
At the SMSF Association (formerly SPAA) National Conference held last month in Melbourne, the ATO confirmed that they are taking a new approach to when an Auditor Contravention Report (ACR) is lodged for an SMSF.
The ATO will now telephone trustees of SMSFs (or directors where there is a trustee company) when they receive an ACR to confirm that the trustees or directors are aware that a breach was identified, as well as query why it occurred and the actions being undertaken to remedy it. The ATO is suggesting that this call will occur very shortly after the ACR is lodged.
The situation will be escalated to an audit if the trustees or directors are:
- unaware of the breach and how it occurred, and cannot discuss the remedial action;
- unwilling to talk to the ATO; or
- unhelpful when the contact occurs.
If a contravention is identified during an audit, an automatic administrative penalty will apply. Under the new penalty regime, the ATO now has the powers to fine trustees up to $10,700 (60 penalty units) per trustee for common breaches (such as borrowing from related parties).
This means that trustees or directors should actively seek to maintain awareness of any ACR that arises to ensure that they are equipped to discuss the breach and the remedial action under way when contacted by the ATO. It’s very important that you are polite and responsive to the ATO – refusal to deal with the regulator almost always results in confirmation of the contravention leading to fines and other possible penalties.