The new penalty regime for self-managed superannuation funds (SMSFs) may allow a relatively lenient approach where cases involve a number of serious breaches of the Superannuation Industry (Supervision) Act 1993 (SIS Act) , if the two recent Federal Court decisions of DCT v Lyons and DCT v Graham Family Superannuation Pty Ltd are any guide to how the regime will be applied by the Courts.
Both cases involved assets of the SMSF being applied for personal use, in breach of multiple provisions of the SIS Act. In the Lyons case, for example, the SMSF loaned all of its assets (a total of $190,000) to a related business, which subsequently failed. As a result, none of the loans were repaid. The SMSF trustees were held to be in breach of numerous provisions of the SIS Act, yet the Court only applied penalties totalling $72,500, despite the maximum penalty available being $220,000 for each breach.
In both cases, the taxpayers cooperated with the ATO’s investigations, expressed remorse, agreed to a set of facts and penalties to be applied before the hearing and had legal representation at the hearing.
Although it is obviously early days, it is hoped that the ATO might adopt a similarly lenient approach.
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