Compliance with super laws: ATO’s approach

When it comes to legal compliance by self managed superannuation fund (SMSF) trustees, the ATO’s main focus is on encouraging trustees to comply with the super laws. However, there are occasions when stronger responses are required.

The following courses of action are available to the ATO to deal with SMSF trustees who have not complied with super laws:

• Education direction – the ATO may give an SMSF trustee a written direction to undertake a course of education when they have been found to have contravened super laws. The trustee will need to provide evidence they have completed the course and sign a declaration confirming they understand their obligations.
• Enforceable undertaking – an SMSF trustee may initiate a written undertaking to rectify a contravention. The ATO will decide whether to accept the undertaking, taking into account the compliance history of the trustee, the nature of the contravention and the strategies to prevent the contravention from recurring.
• Rectification direction – the ATO may give a trustee a written direction to rectify a contravention of the super laws.
• Administrative penalties – individual trustees and directors of corporate trustees are personally liable to pay an administrative penalty for breaches of the super laws. Penalties cannot be paid or reimbursed from the assets of the fund.
• Disqualification of a trustee – the ATO may disqualify an individual from acting as a trustee or director of a corporate trustee if they have contravened super laws or if the ATO is concerned about the individual’s actions or suitability to be a trustee.
• Civil and criminal penalties – these may apply where an SMSF trustee has contravened certain provisions of the super laws.
• Notice of non-compliance – serious contraventions of the super laws may result in an SMSF being issued with a notice of non-compliance. In this case, the fund remains non-compliant until it receives a notice of compliance.
• Allowing the SMSF to be wound up – following a contravention, the trustee may decide to wind up the SMSF and roll over any remaining benefits to an APRA regulated fund. However, the ATO may continue to issue the SMSF with a notice of non-compliance or apply other compliance treatments.
• Freezing the SMSF’s assets – the ATO may give a trustee or investment manager a notice to freeze an SMSF’s assets where it appears that conduct by the trustees or investment manager is likely to adversely affect the interests of the beneficiaries to a significant extent. This is particularly important when the preservation of benefits is at risk.