A Brisbane based registered Self Managed Superannuation Fund (SMSF) auditors, Total tax provides superannuation advice to individuals across Brisbane looking to set-up a SMSF. Because most managed superannuation funds charge fees based on a percentage of the value of the account, it can become more cost-effective to create a SMSF once your fund balance exceeds approximately 200,000.

In order for an SMSF to be eligible for tax concessions it must be compliant with Australian tax laws. Rather than receiving the benefit of a 15% tax rate, non-compliant SMSFs can be taxed at the maximum individual tax rate, which is currently 45%.

The Australian Taxation Office (ATO) takes non-compliance very seriously for superannuation funds – including SMSFs. In addition to the additional tax obligation, the ATO can also:

  • Direct SMSF trustees to undertake education to improve the competence of the trustees
  • Deliver an enforceable undertaking requiring trustees to submit a written undertaking that they will stop the non-compliant behaviour, how they with rectify their contravention and when they will report that the problem has been rectified
  • Send a rectification direction that requires the trustee or director of a corporate trustee to undertake specific actions as determined by the ATO

Penalties for continued non-compliance can include:

  • Administrative penalties that begin at $1,050 (based on 5 penalty units)
  • Disqualification of a trustee
  • Civil and criminal penalties
  • Allow the SMSF to wind up
  • Notice of non-compliance that continues until the ATO issues a notice of compliance

From the point of view of the fund the notice of non-compliance is the most serious penalty as it results in the increased tax rate mentioned at the top of the page. Additionally, in the first year of non-compliance, the fund also has to include in its assessable income the market value of the total assets of the fund (minus any funds that are not part of the taxable income). This means that up to 45% of the market value of the fund could be wiped out (via tax) in a single year!

From the point of view of the trustees, the individual penalties can also be severe, as any fines cannot be paid out of the fund itself. Add to this the potential for criminal charges and you can see that it is vital that your self-managed superannuation fund is set up and administered effectively. As registered SMSF auditors, Total Tax ensures that our Brisbane-based advisors are aware of all relevant legislation to ensure the compliance of your SMSF.