Video transcript – What happens if your fund breaches the law
Most self-managed super funds have no problems operating within super laws.
But if your fund breaches the law, it's important you let the Tax Office know straight away because it might influence the outcome in your favour.
When the ATO becomes aware of a breach, it will consider a number of things:
- Was the breach intentional?
- When did you tell the ATO?
- Did you try to fix it?
If the breach was minor, the ATO might suggest an informal arrangement with your fund to fix it and prevent it from happening again.
Or they may accept a written enforceable undertaking from you to fix the breach.
If the issue was caused by a lack of knowledge, the ATO may direct you to complete a trustee education course.
In some cases, the ATO may give you a formal direction to fix the breach. You will need to provide evidence showing it has been rectified by a set date.
Trustees can be personally fined for breaching some super laws. These fines are generally thousands of dollars and must be paid out of your own pocket.
And in very serious cases, you can be disqualified from being an SMSF trustee which means you can't have an SMSF.
If the breach is serious enough, your fund can be made non-complying. This means it can lose almost half of its assets in tax.
These outcomes can be avoided if trustees take care when running their funds, and make sure they address any issues straight away.
An SMSF professional can also help you stay on the right side of the law.
Remember – your trustee obligations are very important. So, be honest; notify the ATO when you find a breach; and try to fix it if possible.
Your actions will be taken into account when the ATO decides what to do about it. And it may reduce the penalty.
For more SMSF information, take a look at our other videos or visit the ATO website at ato.gov.au