Masterclass SMSF – Penalties the ATO can exercise on SMSF Trustees


Masterclass SMSF – Penalties the ATO can exercise on SMSF Trustees

SMSF – Penalties the ATO can exercise on SMSF Trustees

Self-Managed super fund (SMSF) trustees must always keep in mind the  penalties the ATO can exercise on them.

The penalty system  has been in existence since the  Superannuation Industry (Supervision) Act (SIS Act) and Regulations came into existence in the 199o’s.  They consist of court-imposed civil AND Criminal penalties a s well as the ability of the ATO to administer enforceable undertakings from Trustees, disqualify trustees and or decree the SMSF as non-complying and freeze certain abilities. Court-imposed penalties has been successful in a number of cases since 2007 and peaking in 2010-2011.

Civil Penalties

The civil penalty provisions of the SIS Act  cover some but not all breaches of the operating standards. Civil penalties up to 2000 points ($340,000) can be imposed by the court for breaches such as on the:

  • Sole purpose test;
  • Lending and borrowing of the fund;
  • In-house asset rule;
  • Failure of trustees to report significant events.

Other penalties can include prison sentences.

Criminal Penalties

If a matter is investigated under civil penalty provisions, it is precluded from criminal proceedings. And a mater must be proven “Beyond reasonable doubt”. Criminal proceedings involve:

  • Dishonesty;
  • Deceit;
  • Reckless behaviour.

From 1 July 2014

Because of the pro-longed delay in court proceedings, new legislation has come into being to deal with many of the breaches seen as minor occurrences and to reduce the cost to all parties. The new options for the ATO include:

  • Rectification;
  • Education;
  • Administrative penalties.

Rectification involves the ATO directing the trustee where-as a similar process called enforeceable undertaking is where the trustee provides a corrective measure, and  if so, the ATO cannot make a rectification direction. Rectification usually results with failure to correct a breach and ensure it doesn’t re-occur.

Education often applies with first-time contravention where the trustee displays lack of knowledge of the rules. An ATO-approved course of study is usually required, and proof of completion, or a $850 fine is imposed.

Administrative penalties range from $850 – $10,800 such as for not providing information the ATO requests, or accounts not prepared or kept, or at the top end, lending and borrowing breaches.

For more see:,-rules-and-consequences/

Interested to know what self-managed super (SMSF) is all about, and if it is for you? Come to a FREE seminar with bonuses, run every month Self Managed Super Fund Roadmap (all you need to know) for the next monthly event, see 1 SMSF – FREE Seminars or our other seminars above – Navigate Shares and Property Boost (every few months) in the menu above or call us 0407 361 596


About SuperBenefitnews

Self-Managed Superannuation Service Providers in Australia. SuperBenefit provides a wholistic SMSF assistance, education and administration service continuum - 1. “assistance” is help of whatsoever nature where our overall SMSF experience and knowledge enables us to provide assistance/help without any legal (or “license”) limitations. 2. “education” involves providing knowledge through teaching, coaching and mentoring about all matters SMSF, including (but not limited to) investment issues such as equities and property, 3. “administration” encompasses all admin aspects of legally required SMSF trustee and member record keeping including (but not limited to) audit and ATO matters. In keeping with our key point that SuperBenefit does not provide Financial Advice, where issues arise from 1, 2, and/or 3 above Indicate a need for a legally authorized provider (such as a Financial Adviser) and the client does not have their own service provider, the client can utilize SuperBenefit’s ‘Connect Assist’ … SuperBenefit, in itself, does not provide Financial Advice, but it does provide the wherewithal for great SMSF service. WE do not provide Financial Advice or any other service that requires a legally authorized provider. However, where such advice or service is required we have our ‘Connect Assist’, a SuperBenefit resource we use to connect clients to a Licensed Advisor or other legally authorised service provider. Call us 0407 361 596, no obligation FREE Connection call to see how we can help you!
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