SMSF, Family law and new ATO penalties

Posted on December 1st, 2014

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by Mark Sullivan

Mark Sullivan is a Director at Mullane & Lindsay in Newcastle and specialises in Family, Relationship and Matrimonial Law

When a relationship breaks down and the parties have a SMSF together it is often in both parties’ interests for their SMSF to be wound up, or for one party to roll out of the fund into some other complying Fund. A clean break in such circumstances is generally a good thing.

In negotiating property settlements for clients it occasionally came to light that there were breaches of superannuation legislation which placed the parties at risk of penalty. A SMSF that was declared to be non complying caused great loss of wealth to the parties. Such issues with the ATO therefore needed to be remedied as part of any settlement.

On 18 March 2014 laws giving the ATO new and more flexible powers to deal with SMSF trustees who breach super law received royal assent. The message for all SMSF trustees is clear – rectify contraventions as soon as possible or have plans in place to do so by 1 July 2014. This message will remain urgent for those engaged in family law property settlements with a SMSF – rectify any outstanding contraventions as part of the settlement process.

The new laws apply to contraventions that occur from 1 July 2014 and cover administrative penalties, education directions and rectification directions. Trustees will be personally liable for penalties of up to $10,200 per breach (if it is an administrative penalty provision) and may be directed by the ATO to rectify the contravention and undertake an SMSF education course.

Mark Sullivan is a Director at Mullane & Lindsay, and practises extensively in Family, Relationship and Matrimonial Law. If you require any assistance in this area please contact Mark Sullivan to arrange a consultation or contact our Newcastle office.

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