There are benefits of Self Managed Super funds but beware of penalties

There are benefits of Self Managed Super funds but beware of penalties

Jul 28, 2014

There are benefits of Self Managed Super funds but beware of penalties. It is very important to ensure that all regulatory requirements are strictly adhered to. There are very serious consequences for failing to comply with these obligations including hefty taxation penalities as well as criminal and civil sanctions.

On 1st July 2014, the regulatory regime became even more rigorous. Some of the most significant changes are summarised below:

  • New administrative penalties

The ATO can now impose new list of penalities for administrative mistakes with penalities ranging from 5-60 penalty units (calculated as $170 per unit). Administrative mistakes include things like a trustee failing to sign a trustee declaration (up to 10 units – $1,700) and failing to prepare financial statements for the fund (each trustees will be fined $1,700. The maximum penalty for these adminstrative issues is $10,200 per breach. More inforamtion can be found in Schedule 2 of the Tax and Superannuation Laws Amendment (2014 Measures No 1) Act.

  • Power to force rectification

The ATO now has the power to force the rectification of certain contraventions by issuing a ‘rectification direction’ which requires the trustee “to undertake specified action to rectify the contravention within a specified time frame and provide the Regulator with evidence of the person’s compliance with direction.”

  • Mandatory trustee education

The ATO can also now issue ‘education directions’ for a trustee “to undertake a specified course of education within a specified time frame and provide the Regulator with evidence of completion of the course.” Anyone who is issued such a direction my attended an ATO apprived course to comply with the direction.
Special contributions and big money cases

In late may 2014, the Full Court of the Family Court handed down the appeal decision in Hoffman and Hoffman. This case involved an appeal by the husband from a judgment in the Federal Circuit Court.

The husband argued that he had made “special contributions” to the matrimonial pool. The husband argued that his “special skills and entreprenurial flair” in property “acquisition, development and value adding” were “instrumental in the parties having the real property which they did at the time of trial”. The husband relied on previous cases in which there was a reference to ‘special skills” to argue that his contributions were over and above the ordinary contributions made by a partner in a relationship and therefore that his contributions were greater than that of the wife. The husband’s case was that the judge at first instance failed to apply this alleged principle of “special contributions” and as a result, the trial judge’s assessment of contributions was wrong and unjust.

The appeal court found that the husband’s arguments were not correct and ordered that the appeal be dismissed. .The main thust of the appeal court’s decision were that:

  • The trial judge was correct in finding that there is “no binding rule of law relating to special contributions”
  • That any guidelines developed by the appellate family courts “guide the discretion of the court” only, They don’t replace it and the court must “do justice according to the needs of the individual case”
  • After an analysis of the relevant case law, there was no principle or guideline “that renders the direct contribution of income or capital more important or special when compared against indirect contributions and, in particular, contributions to the home or the welfare of the family”
  • Epithets of “special contributions: or “special factors are no great value and quoting a previous case, “the notional of special contribution has all been a terrible mistake”

Perhaps the most significant finding was that in relation to determining whether property adjustments should be made under s79 the court said: “The task is to make findings as to the nature, form, characteristics and duration of each and all of the contributions made by each of the parties” under the Family Law Act.

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