The SMSF administrative penalties, rectification directions and education directions regime is now law (via the Tax and Superannuation Laws Amendment (2014 Measures No. 1) Act 2014). From 1 July 2014, the ATO will have the power to: - issue scaled penalties to SMSF trustees for breaches of the SIS Act (in addition to the power to make a SMSF non-compliant); - order SMSF trustees/directors to attend education courses if they have breached the SIS Act; and - order SMSF trustees to rectify breaches of the SIS Act. The Bill also introduces penalties to deter and penalise persons who promote illegal early release schemes from regulated superannuation funds.

As we previously identified (see http://tinyurl.com/mgl5z7b) the operating standard compelling SMSF trustees to hold their assets separately is a limited obligation due to the wording of the standard in regulation 4.09A of the SIS Regs. The obligation only prevents mixing of the trustee’s personal assets or those held by a standard employer sponsor (or associate of the employer sponsor).

In our previous articles on Stronger Super and SMSFs, we outlined how the SuperStream measures would affect SMSFs and that some of those obligations would commence from 1 July 2014. Subsequently, the Australian Taxation Office (ATO) has released further information, including a letter to SMSF trustees, outlining the SuperStream compliance obligations for SMSF trustees.

The former Government’s first effort at alleviating the harsh operation of the excess concessional contributions (ECCs) regime was firstly introduced with effect from 1 July 2011 (and operated for the 2011/12 and 2012/13 years). Those rules operated so that on the first occurrence of an individual having ECCs, provided such ECCs were $10,000 or less, the individual had a one off choice of having up to 85% of their ECCs refunded where that amount refunded was subject to marginal tax rates (subject to satisfying certain criteria). Given the restrictive nature of this measure, it was roundly criticised as being inadequate.

Collectables, market value reporting, separation of assets, investment strategies and 30% tax on contributions

In our first two articles on stronger super and SMSFs we set out a time line of the various stronger super and other Government changes that have affected self managed superannuation funds (SMSFs) in the last few years. In this article we look at some of those changes that commenced in the 2011/12 and 2012/13 years in more detail.

The director penalty regime has been in place since 1993 and most directors have at least a “working knowledge” of how the provisions operate and when they could become personally liable for the pay as you go (PAYG) withholding tax liabilities of their company. However, from 30 June 2012, the director penalty regime has been significantly expanded to include the superannuation guarantee obligations of the company, as well as restricting the application of some of the statutory defences.

Due to the election being called, the Bills which sought to introduce these measures have now lapsed.  These measures will therefore not become law unless the next Government re-introduces the Bills into Parliament.

The Stronger Super changes to the superannuation system are mainly focussed on large super funds, particularly the “MySuper” and “SuperStream” changes. However, there are a number of Stronger Super changes that directly, or indirectly, affect self managed superannuation funds (SMSFs).