Proposed changes which will allow the Australian Taxation Office (ATO) to impose administrative directions against the trustees of self-managed superannuation funds (SMSFs) will represent a welcome change, according to the Institute of Chartered Accountants in Australia (ICAA) superannuation specialist, Liz Westover.
Westover has used comments on the ICAA website to suggest the proposed new regime will prove more effective than existing arrangements.
"Under this new regime the ATO will have the power to issue administrative directions (rectification orders or trustee education) and impose penalties for contraventions by SMSF trustees," Westover said.
"Fundamentally, I believe these measures, coming out of the Stronger Super reforms are a positive move for the SMSF industry."
She said that, currently, the only real weapon for recalcitrant trustees was for the ATO to make the SMSF non-complying and/or disqualify the trustee.
"The outcome of such action is significant, with the fund effectively being taxed on a large portion, if not all, of its assets at the highest marginal tax rate," Westover said.
She said the problem with the current system was that because of the significant effects of declaring a fund non-complying, the ATO might be reluctant to impose such a penalty on funds (or their trustees) for minor breaches.
"Consequently, there is a view that some funds may push the boundaries on some of the more minor breaches, confident that the ATO will not go so far as to make them non-complying. Clearly, optimal regulation is not being achieved," Westover said.
She said it therefore made sense to introduce a system with more flexibility in which trustees who were not adhering to the rules could be penalised for minor breaches without potentially catastrophic and disproportionate effects.
