Update for SMSF Trustees: ATO Enforcement Actions for Non-Compliance

The ATO has updated its guidance on what actions it can take when a SMSF or its trustee does not follow super laws. The ATO stresses that trustees must understand their responsibilities. It also makes clear that there can be serious consequences if trustees don’t meet those responsibilities.

This article provides a timely reminder of the resources available to SMSF trustees to ensure they know their obligations, and summarises the wide range of non-compliance actions that the ATO can draw on if an SMSF trustee breaches those obligations.

Helping Trustees Stay Compliant

To support trustees, the ATO offers a range of resources. These include early engagement services, voluntary disclosure options, and educational tools. Trustees can also access online guidance and the SMSF Newsroom, which provides updates on tax, superannuation, and registry services. The ATO expects trustees to use these resources to stay informed and compliant.

What Happens When an SMSF Is Non-Compliant

If an SMSF breaks the rules, the ATO looks at several factors before deciding what action to take. These include:

• Whether the trustee has tried to fix the issue early or disclosed it voluntarily.
• The ATO’s general preference to avoid winding up SMSFs after a breach.
• The type and seriousness of the breach.
• The trustee’s past compliance history.
• Whether personal fines should be applied.

The ATO uses the Taxpayers’ Charter, its compliance model, and a good decision-making framework to ensure fair and consistent outcomes.

Actions the ATO Can Take

1. Enforceable Undertaking

Trustees can offer a formal plan to fix the problem. The ATO will consider the trustee’s history, the nature of the breach, and whether the issue can be resolved. If the ATO accepts the plan then the trustees provide a formal written undertaking.

2. Rectification Direction

The ATO may direct the trustee to correct the issue. This often involves putting new management or administrative processes in place. Ignoring this direction can lead to offences, disqualification, or tax penalties.

3. Administrative Penalties

Trustees may be fined between 5 and 60 penalty units, which will result in fines between $1,650 and $19,800 for offences committed after 7 November 2024. These fines must be paid personally and cannot come from the SMSF’s assets.

4. Raising an Income Tax Assessment

If a member illegally accesses their super, the ATO will include that amount in their taxable income. This can result in extra tax, penalties, and interest.

5. Notice of Non-Compliance

For serious breaches, the ATO may issue a notice of non-compliance. This means the SMSF could be taxed at up to 45% and may not be able to accept rollovers or employer contributions. The ATO considers the seriousness of the breach, the tax impact, and the trustee’s history.

6. Disqualification of a Trustee

Trustees can be disqualified for serious or repeated breaches. Once disqualified, they must step down. Continuing to act as a trustee after disqualification is an offence.

7. Freezing SMSF Assets

If a trustee’s actions could seriously harm the fund’s beneficiaries, the ATO can freeze the SMSF’s assets.

8. Civil and Criminal Penalties

In serious cases, the ATO may pursue civil or criminal penalties, depending on the situation.

Conclusion

The ATO has made it clear that it expects SMSF trustees to fully understand and meet their obligations. It provides detailed guidance and resources to help them do so. However, if trustees fail to comply, the ATO has a wide range of actions it can take. These actions highlight the importance of staying informed and acting responsibly.

What are the Cleardocs products available?

Cleardocs offer the following relevant products:

• Superannuation Trust (SMSF)
• SMSF set up + register Corporate Trustee
• Update to SMSF
• SMSF Change of Trustee
• Change SMSF Trustee (Cleardocs deed)
• SMSF Minutes & Resolutions Package

Please read the Product Benefits, Product Information and Frequently Asked Legal Questions carefully and consider if it is appropriate in your circumstances before purchasing any Cleardocs product.

More information from Maddocks

For more information, contact Maddocks on (03) 9288 0555 and ask to speak to a member of the Commercial team.

More Cleardocs information on related topics

• Necessary safeguard for SMSFs and Trusts: Why you should have an Enduring Power of Attorney in place
• NALI updates now in force: What the changes to NALI mean for your SMSF
• Reminder for SMSF trustees: be aware of legal requirements for accessing superannuation early
• Up for Discussion - the retirement phase of superannuation