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The growth of self-managed super funds (SMSF)
In December 2014 the ATO published an article outlining SMSF statistics from the lodgement of the 2013 income tax returns. The following are some the key statistics published:
- The number of SMSF’s in Australia is currently 534,000
- The number of SMSF’s has increased by 29% in five years
- The total assets of SMSF’s is $557 billion
- The majority of SMSF’s are in accumulation phase
- Over the last five years, 7 per cent of SMSF’s moved into the full pension phase
- In the 2013 financial year, SMSF’s experienced a positive return on assets of 10.5 per cent
- The 2013 return was the highest over five years and the fourth consecutive year of positive returns
- The proportion of SMSF’s with borrowings increase from 1.5 per cent in 2009 to 5 per cent in 2013
- As at June 2013, SMSF borrowings were equivalent to 1.9 per cent of total SMSF assets
A copy of the ATO article can be found at the following link: ATO article
A full copy of the ATO report can be found at the following link: ATO report
New ATO penalty regime
Under the new penalty regime that came into effect from 1 July 2014, trustees may be subject to Rectification Directives, Mandatory Education and Administrative Penalties if found to be in breach of superannuation law.
The following is a link to the ATO website that provides full details of this penalty regime: ATO penalty regime
Trustee responsibilities
The ATO have published a guide titled Running a self‑managed super fund (NAT 11032-04.2013). This guide includes useful information and is a “must read” for anyone considering establishing a SMSF.
Page 8 of Running a self‑managed super fund details the following rules trustees of an SMSF must follow:
- Act honestly in all matters concerning your fund
- Exercise skill and diligence in managing your fund
- Act in the best interest of all members at all times
- Keep the money and assets of your fund separate from other money and assets (e.g. personal assets)
- Retain control over your fund
- Develop, implement and regularly review an investment strategy
- Consider if the fund should hold insurance cover for its members
- Do not enter into contracts or behave in a way that hinders you or other trustees from performing functions
- Do not access or allow others to access funds early
A full copy of the ATO publication can be found at the following link: ATO publication
SMSF Penalties
Page 29 of the ATO publication titled Running a self‑managed super fund outlines the ATO penalties that may apply to SMSF’s.
The ATO regulate SMSF’s to ensure they comply with the super law. Failing to comply is known as a contravention of the SISA or SISR and will result in some type of compliance action. The following is an example of penalties the ATO can impose upon the fund and its trustees:
- Instigate prosecution proceedings
- Make a SMSF non-complying
- Disqualify trustees
- Suspend or remove one or all of the trustees of an SMSF
- Freeze the assets of the fund
For less serious matters, the ATO may enter into agreements with trustees about a plan for them to rectify the problem, without necessarily imposing the above sanctions.
A complying fund that has been made non-complying will suffer serious tax consequences. The fund’s total assets (less any member contributions that no tax deduction has been claimed for) are subject to tax at the highest marginal rate. Any income received in a financial year in which a fund is non-complying is taxed at the highest marginal rate.
If a trustee is prosecuted and is found guilty of either a civil and/or criminal offence under a civil penalty provision, the maximum penalties that may apply under Part 21 of the SISA are $340,000 (civil proceedings) and five years’ imprisonment (criminal proceedings).
A full copy of the ATO publication can be found at the following link: ATO publication
