By Paul Trimble, Director, Westlawn Business Services 20 August 2014
Some important changes to the superannuation rules came into effect on 1 July this year that all self managed super fund trustees need to understand. These changes include increases to the super rates and thresholds and new penalty powers available to the ATO for breaches of the superannuation rules.
Increases to super rates & thresholds
The following increases apply to the superannuation rates and thresholds from 1 July 2014:
Superannuation Guarantee (SG) increases from 9.25% to 9.5%
General concessional contribution cap increases from $25,000 to $30,000
Temporary concessional contribution cap (applies to those aged 49 years or over as at 30 June 2014) is $35,000
Annual non-concessional cap increases from $150,000 to $180,000
Non-concessional cap under the bring forward rule increases from $450,000 to $540,000. However, if the bring forward provisions have already been triggered (in 2013/14 financial year or earlier) the cap is not indexed and remains at $450,000.
ATO’s new penalty powers
The Australian Tax Office has new powers to impose penalties on SMSF trustees if the fund breaks certain superannuation rules. These new penalties apply to contraventions that occur from 1 July 2014 as well as contraventions that were made prior to 1 July and remain unrectified.
There are 3 types of new penalties the ATO can impose on trustees:
A direction for SMSF trustees to undertake an education course to improve their superannuation knowledge.
A direction to rectify any breaches of the superannuation rules that the fund has not complied with, and
An administrative penalty for breaching the rules. Fines range from $850 for minor administrative matters through to $10,200 for more serious matters such as breaches in relation to the fund’s investments.
These new penalty powers are available in addition to the ATO’s existing penalties, which include:
Disqualifying fund trustees
Treating the fund as non-complying, or
Imposing an enforceable undertaking to require trustees to correct a breach.
Back to school
For first time contraventions, or where trustees are unaware of the rules, the ATO may issue education directions. These directions require SMSF trustees to undertake a course to improve their superannuation knowledge.
SMSF trustees issued an education direction will have to undertake the course within a certain time frame. Then, within 21 days of completing the course, they must provide the ATO with evidence of completion and sign a trustee declaration confirming their understanding of their duties as a trustee.
Any education costs must be met by the trustee and cannot be paid or reimbursed from money held within the SMSF.
Fix the breach
Rectification directions from the ATO can direct an SMSF trustee to rectify the contravention within a certain timeframe and upon completion, provide the ATO with evidence.
Pay the fine
When the superannuation legislation has been breached, the ATO can impose a penalty which is levied at the full rate. For example, if the fund breaches the rules for lending, borrowing or related party investments the penalty is $10,200 for each breach.
For breaches relating to reporting or keeping records about the fund, a fine of $850, $1,700 or $3,400 can be imposed.
Important note: Any fines levied apply to all individuals who are fund trustees. So, if the fund has more than one trustee, the penalty can apply to each individual trustee, which could be up to 4 times the standard penalty. However, for funds with a company trustee, only one penalty is imposed and all directors of the trustee will be held jointly and severally liable to pay the fine.
As is the case with costs incurred for education directions, fines cannot be paid from money held within the fund and must come from either the company trustee or the personal resources of the company’s directors or individual trustees.
How we can help
Contact your Westlawn Business Services Accountantif you’re uncertain as to whether your fund complies with the superannuation rules, or if you’re unsure of the rules before the fund receives contributions, pays benefits or makes investments.
While SMSF trustees may rely on their accountant, financial adviser, lawyer or auditor to help manage their SMSF, it’s important to remember that the ultimate responsibility and accountability remains with the fund trustees.
Disclaimer Westlawn Business Services Pty Ltd provides this information for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation.