- Switzer Report - https://switzerreport.com.au -

Contraventions and the ATO – expect a call

If your self-managed super fund isn’t in ship-shape order, don’t be too surprised if you get a call from the Australian Taxation Office this year. The ATO is taking a new approach to contraventions as part of its new penalty and compliance system.

All auditors still need to report contraventions to the ATO via an auditor’s contravention report (ACR) but now the ATO is employing three options to deal with those breaches once it receives the ACR.

Director of SMSF income tax and regulatory programs, superannuation at the ATO, Nathan Burgess, said that in minor cases a warning letter urging the trustee not to make the same mistake again could be issued, but in many cases the ATO would be calling the trustee.

“We’ve decided to do a phone call to the trustee, or one of the trustees, and talk through the actual contravention to make sure they are aware of it and what steps they are doing to fix the contravention,” Burgess said at the SMSF Association conference in Melbourne today.

“The phone calls are not ‘got you’ calls…The ATO wants to do this approach because it’s not about penalties [it’s about doing the right thing],” Burgess said.

It’s very important that you are polite and responsive to the ATO if, and when, it does call. Burgess said that about one in 10 of the phone calls it makes needs to be escalated when, for example, the trustee might refuse to deal with the regulator. A contravention is almost always confirmed in this situation and followed up with a fine by the ATO, along with other possible penalties.

If the ATO can have a constructive conversation with the trustee over the phone, and if the trustee can explain what happened (particularly if it was an accident), the regulator may be able to avoid confirming a contravention, which would mean the fund can also avoid a penalty.

The ATO is also trying to expedite the whole process, which means you’ll either get the letter or the phone call quite quickly after the ATO has received the contravention report from your auditor.

Under the new penalty regime, the ATO now has the powers to fine trustees up to $10,700 (60 penalty units) per trustee for common breaches such as borrowing from related parties.

And even if it is an old contravention, if it was still unrectified on 1 July 2014, it will fall under the new penalty regime.

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