Thing’s you Can’t do & What are the Consequences

1. THINGS YOU CAN’T DO – <Click here>, where you do something wrong and then see the consequences below.

2. CONSEQUENCES OF DOING SOMETHING WRONG

If you do something wrong and you are unaware of it, either your accountant in preparing the financial report and income tax returns will bring this to your attention, or if the accountant does not detect the error, but the Auditor of the funds does detect the error, then a number of consequences can occur.

Lets take an example lets say you cannot obtain a copy of the financial reports of a private company that your Super Fund has invested in. This means that the Auditor cannot verify (a) the existence of the investment or (b) the value of the investment, as such the Auditor would issue qualified audit opinion, and this qualification would be reported in your income tax return so the Tax Office is notified, read more on <Why do I need to get my Super SMSF audited >. This error may not result in any penalty from the Tax Office as this error may not be a breach of the SIS rules and therefore a <contravention report> may not be required.

Lets take another example, lets say you accidentally pay a bill for a private item that is not related to your super fund. This would represent a loan from the super fund to you and if this loan is more than 5% of net assets of the fund then a contravention report would need to be submitted to the Tax Office. The Tax Office will assess the severity of the contravention. A contravention report should contain the following information:

• specify the sections of the SIS Act or regulations that have been breached.
• the years of the contravention
• description of the contravention including the period of contravention, impact on the fund, remedies to fix the breach and steps taken to prevent a future breach.
• Any other matters to help reduce ay penalty and not alter the complying status of the fund. Remember it’s only complying superfund that attracts then favourable tax treatment.
• Whether the contravention has been corrected.

Penalties of early access – If you knowingly allow early access to funds then as a trustee of an SMSF up to $220,000 and jail terms of up to five years, or fines of up to $1.1M for corporate trustees and the SMSF may also be treated as non-complying, which means the assessable income of your fund will be taxed at the highest marginal tax rate (45%), and your fund’s income may include the value of its assets that were accumulated before your fund became non-complying

Here’s what the ATO has to say if you do something wrong <ATO-Link>.