Superannuation and false or misleading statements which do not result in a shortfall amount
Superannuation and false or misleading statements which do not result in a shortfall amount
Following industry consultation, we recently published Practice Statement PS LA 2012/4, which details how we will administer the false or misleading no-shortfall penalty.
Fund trustees who make a false or misleading statement after 4 June 2010 may be liable for penalties, even where the statement does not result in a shortfall amount. The penalty will not be applied if reasonable care was taken at the time the trustee made the statement. The statement must also be false or misleading in a 'material particular' for this penalty to apply. Forms containing material particulars include:
- member contributions statement (MCS)
- lost members statements (LMS)
- departing Australia superannuation payment (DASP) reports.
The penalty can apply to multiple instances of a false or misleading statement contained in a form.
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The statement:
- can be written or verbal
- must be material to tax or super law
- can be for any taxes, including reporting, lodgment, debt and registration statements made by an entity.
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When is a statement false or misleading?
Generally, a statement is false if it is contrary to fact or wrong, irrespective of whether the entity making the statement knew or did not know that it was false. Omissions may also be considered statements for the purposes of determining a penalty.
A statement is misleading if it creates a false impression or it is uninformative, unclear or deceptive, even if the statement is true.
False or misleading statement in a material particular
A statement will be in respect of a 'material particular' where it:
- is made for a purpose connected with a tax or super law
- is relevant to a decision, power or function for which the statement is made and the statement is not immaterial, inconsequential or trivial.
For super matters, generally these will be statements:
- where a taxation or super law provides for the making of the statement, or
- that concern an issue relevant to the entity's taxation or super affairs or the entity's regulation under super laws.
What is the penalty amount
The law provides different penalty amounts for false or misleading statements, depending on the behaviour that led to the statement.
There is no liability to a penalty where:
- the entity who made the statement took reasonable care
- the entity followed ATO advice or ATO general administrative practice
- safe harbour provisions apply
- the entity makes a voluntary disclosure about the false or misleading statement prior to being notified about an examination of its affairs.
Where an entity is liable to the penalty, the amount of the penalty is based on the following categories of behaviour (referred to here as the base penalty amounts):
- failure to take reasonable care - 20 penalty units
- recklessness - 40 penalty units
- intentional disregard - 60 penalty units.
A penalty unit is currently $170.
The relevant base penalty amount (BPA) can also be increased where certain factors exist or reduced where a voluntary disclosure is made (after you have been notified about an examination). We also have the power to remit a penalty in full or part.
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Generally we will apply administrative penalties for false or misleading statements, as they relate to super reporting, only as an outcome of an investigative process.
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For more information on:
- the meaning of reasonable care, recklessness and intentional disregard, refer to Miscellaneous Taxation Ruling MT 2008/1
- when the false or misleading (no-shortfall) penalty may be imposed in relation to APRA-regulated and non-regulated super funds, SMSFs and third parties, refer to the examples.
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Examples
The operation of this penalty depends heavily on the facts of each case. For examples that illustrate how the penalty may apply in certain circumstances, refer to:
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These examples are intended to provide general guidance only and do not provide a binding view on how the administrative penalty will be applied in particular circumstance. The consideration and application of the penalty will be applied on a case-by-case basis.
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For more information refer to:
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Last Modified: Tuesday, 8 January 2013
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