New penalties deterring SMSF breaches
Recently introduced penalties are ensuring fewer self-managed superannuation funds (SMSFs) are falling foul of the law, however, there has been a spike in borrowing breaches, new research reveals.
The annual Partners Wealth Group (PWG) review of more than 600 SMSFs found that five per cent had required a contravention report to be lodged with the Australian Taxation Office (ATO), down from 5.3 per cent in 2013 and 2012.
While there was an increase in the number of borrowings' breaches — which accounted for almost 25 per cent of breaches - PWG director SMSF consulting and auditing, Martin Murden, said penalties introduced by the ATO on 1 July 2014, had proven successful.
"Under the new legislation, each trustee can be fined up to $10,200 for breaches of the rules governing superannuation funds, with maximum fines applying to breaches of the house asset rule or making loans to members," he said.
"To add to the woes of SMSFs in breach, problems which are not dealt with immediately will be brought forward to the following year, meaning that funds have the potential to be fined for one error twice."
Murden warned that many of the breaches relating to borrowing stemmed from a misunderstanding of the rules that have resulted in SMSF trustees thinking it was permissible to use their fund to borrow to overcome short-term liquidity problems.
Other transgressions highlighted by the research, included funds taking personal loans for members (23 per cent) and breaches of the in-house assets rule (20 per cent), which are restricted to five per cent of total superannuation assets.
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