ATO Flexing its current and new enforcement powers against SMSFs

For the 2014/15 financial year the ATO has achieved the following enforcement results against SMSFs:

•    361 enforceable undertakings were accepted by the ATO;
•    54 education directions were issued;
•    27 rectification directions were issued;
•    92 funds were made non-complying;
•    663 individuals were disqualified as trustees; and
•    44 SMSFs were wound-up.

Since 1 July 2014 the ATO has had the power to issue education and rectification directions and the power to issue administrative penalties (sometimes known as “speeding tickets”).

An education direction is simply an ATO issued direction that the individual undertake an ATO-approved education course.  The course must be undertaken within the specified time and a completion certificate provided to the ATO.  Typically, the courses are web-based and no fee can be charged.

A rectification direction is simply an ATO issued direction that individuals undertake certain actions to rectify a contravention.  The actions must be completed within a specified time and evidence of completion of the actions must be provided to the ATO.  The specified actions could include the adoption of different systems or procedures.  The ATO will generally allow a six month period in which to complete the actions.

A failure to comply with an education or rectification direction incurs a penalty of $1,800.  This penalty must be paid by the individual and cannot be paid or reimbursed by the SMSF.