Taxman promises to stay his hand

The tax office says it will go easy where super funds can show they are trying to comply with new rules. By TERRY HAYES of Thomson Legal & Regulatory.

By Terry Hayes

DIY super funds tax rules penalties

The new “simplified” superannuation rules commenced on 1 July this year. Trouble is, they are so “simplified”. It will take some time to fully comprehend them!




The new simplified superannuation rules apply to self-managed super funds as well as other funds, and given that many SMEs have self-managed funds, they might understandably be finding it difficult to come to grips with the new rules, including the tax office’s increased attention on such funds.

Add to this the new requirement that trustees of self-managed funds, often the SME owner, now have to sign a declaration that they understand their duties as trustee, and it’s not hard to see that the pressure is on SME fund trustees to be sure they know what they are doing. 

The declarations must be signed within 21 days of anyone becoming a trustee and must be kept for at least 10 years. Not signing and retaining the declaration is an offence under the super laws. The tax office says that when it conducts compliance work concerning self-managed funds, it will request a copy of the declaration.

In recognition that the changes are so major and so fundamental, the tax office has indicated that, in the first year of the new rules, no penalties or other regulatory sanctions will be imposed for non-compliance with new obligations where the tax office can see that self-managed super fund trustees are making a genuine attempt to comply.

The tax office said that, for the period 1 July 2007 to 30 June 2008, this no-penalty policy will apply in relation to:

  • Mistakes because of changes to the reporting of fund members’ contributions statements.
  • Failing to notify of changes to trustees.
  • Compliance with release authorities.
  • Compliance with the trustee declarations.

For the period 1 July 2008 to 30 June 2009, the policy will apply in relation to mistakes as a result of the self-managed super fund annual return.

However, the tax office warns that all other cases of non-compliance will mean penalties and sanctions will be imposed.

SMEs should note that, from the 2007-08 income year (that is, the year 1 July 2007 to 30 June 2008), there will only be one annual return for self-managed funds. This one return combines the fund income tax return, the regulatory return, and the fund member contribution statement.

This should make it easier for these funds instead of having potentially separate dates for lodgement of the three returns as in the past. Of course, it also means SME trustees will need to have all the relevant information together at the same time.

The tax office has recently released rulings and draft rulings on important issues for self-managed funds such as the in-house assets rule, the prohibition on funds providing financial assistance to fund members, the sole purpose test, and the reinvestment of in-house assets.

All these are important issues for self-managed funds, but the tax office says it also plans to provide more specific advice than it has done in the past to fund trustees who contact the office individually. This should be helpful to trustees.

While this advice cannot be legally binding on the Tax Commissioner, the tax office says it will look at all the facts and circumstances of a particular case and give more specific advice about how the law might be interpreted in a given situation. This should provide greater clarity for trustees.

In order to allow the tax office to do this, fund trustees may be asked to give the tax office more information on their arrangements and to explain all the facts relevant to a transaction. However, the tax office says it won’t be telling trustees whether or not the Commissioner will make a fund non-complying if they enter a particular transaction.

Where the tax office advises a trustee that it considers a particular transaction would be a contravention of one of the rules of the superannuation law, it says it would expect the trustee not to enter into that transaction, or to rectify the contravention if they already have.

The new superannuation environment means there is a lot to comprehend and learn for SME trustees of self-managed super funds. The tax office clearly understands this and is trying to help as much as it can. Trustees should make sure they take advantage of the help offered, while at the same time ensuring they get good professional advice.


Terry Hayes

Terry Hayes is the senior tax writer at Thomson Legal & Regulatory , a leading Australian provider of tax, accounting and legal information solutions.

For more Terry Hayes features, click here .



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