Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 74

Key changes for SMSFs and new ATO powers

Andrew Bloore, Chief Executive of SuperIQ, summarises the three key changes SMSF trustees and advisers must be aware of from 1 July 2014.

1.  Increases to super thresholds for 2014/15

  • the general concessional contribution cap increases from $25,000 to $30,000.
  • the temporary concessional contribution cap (applying to those aged 49 years or over as at 30 June 2014) is $35,000.
  • the annual non-concessional cap increases from $150,000 to $180,000.
  • the non-concessional cap under the bring forward rule increases from $450,000 to $540,000. However, if the bring forward provisions have already been triggered (in the 2013/14 financial year or earlier) the cap remains at $450,000 and is not indexed to the higher limit.
  • the Superannuation Guarantee rate increases from 9.25% to 9.5%.

2.  Changes to insurance definitions for superannuation funds from 1 July 2014

SMSFs will only be able to provide an insured benefit to a member that aligns with a condition of release, allowing the following policies to be provided:

  • death
  • terminal illness
  • permanent incapacity
  • temporary incapacity

However, polices such as trauma insurance, which do not have a condition of release, are now prohibited.

Also many policies have ancillary benefits imbedded in them that also do not strictly align with a condition of release (for example, often an Income Protection policy will pay a lump sum for a specified injury, such as a broken limb), but because this does not align with any condition of release from superannuation, the same policy inside an SMSF will not be able to provide this ancillary benefit.

3.  New ATO administrative penalty powers effective 1 July 2014

These measures provide the Australian Tax Office with powers to levy penalties for breaches of superannuation law, including rectification and education directions for SMSF trustees and a financial administrative penalty regime.

The administrative penalty will fine trustees for breaches that in previous years have escaped punishment. Where a penalty is imposed it must be paid by the trustee personally (i.e. not from the assets of the SMSF). The fines are based on penalty units, which is currently $170 per unit. Fines range from $850 for failing to comply with an ATO education directive (5 penalty units), all the way through to a $10,200 fine for a fund that, say, lends to a member or relative of a member (60 penalty units).

 

Monica Rule provides more detail on the ATO’s new administrative penalties.

From 1 July 2014, the ATO has new penalties to impose on SMSF trustees who contravene the superannuation law. The new penalties apply to contraventions that occur from 1 July 2014 as well as contraventions that were made prior and remain unrectified.

The old penalty regime only allowed the ATO to take the following limited, and in my opinion, quite harsh options on trustees for contravening the superannuation law:

  • issue a notice of non-compliance to the SMSF (i.e. remove the tax concessions)
  • disqualify the trustee
  • accept an enforceable undertaking from the trustee to rectify the contravention
  • take civil or criminal action on the trustee.

The old penalty powers did not allow the ATO to take appropriate action based on the severity of the contravention. The new penalty powers allow the ATO to tailor the penalty to fit the contravention, including:

  • rectification directions
  • education directions
  • administrative penalties

With rectification directions, the ATO can direct an SMSF trustee to rectify the contravention within a certain timeframe and upon completion provide the ATO with evidence.

Education directions allow the ATO to direct an SMSF trustee to undertake specific education to improve their superannuation knowledge within a certain timeframe. Within 21 days of completing the course, the trustee must provide the ATO with evidence that they have completed the course and sign a trustee declaration form confirming their understanding of the trustee’s duties. Any costs incurred for the education cannot be paid or reimbursed from the SMSF.

Administrative penalties will be imposed for specific contraventions. The amount of the penalty will vary depending on the seriousness of the contravention and applied at the full rate. The trustees or directors of corporate trustees will be personally liable for the penalty ranging from $850 to $10,200. The penalty must come from the corporate trustee or the personal resources of the company’s directors or individual trustees. If an SMSF has individual trustees, then each individual trustee will be liable for the penalty (e.g. $10,200 penalty x 4 individual trustees, totalling $40,800). If an SMSF has a corporate trustee, then each director will be jointly liable for the one penalty (e.g. $10,200 penalty divided by 4 directors). The ATO does have power to remit the penalty and will consider remission based on a trustee’s past compliance history, whether trustees have been reckless or incompetent in the operation of their SMSF; and the likelihood of complying in the future.

The new penalties can be imposed by the ATO in addition to the other enforcement actions.

Although trustees may rely on their accountant, financial adviser, lawyer or auditor to help manage their SMSF, the ultimate responsibility and accountability lies with the trustee of the SMSF. If you are planning to take more interest in the superannuation and SMSF laws, it is much better to do it on your own terms than be directed to do so by the ATO.

 

Monica Rule worked for the Australian Taxation Office for 28 years and is the author of ‘The Self Managed Super Handbook – Superannuation Law for Self Managed Superannuation Funds in plain English’. Monica is currently presenting a series of SMSF seminars around Australia.

 


 

Leave a Comment:

RELATED ARTICLES

Navigating SMSF property compliance

Over the top: exceeding the concessional cap

Latest SMSF updates from the ATO

banner

Most viewed in recent weeks

Australian house prices close in on world record

Sydney is set to become the world’s most expensive city for housing over the next 12 months, a new report shows. Our other major cities aren’t far behind unless there are major changes to improve housing affordability.

The case for the $3 million super tax

The Government's proposed tax has copped a lot of flack though I think it's a reasonable approach to improve the long-term sustainability of superannuation and the retirement income system. Here’s why.

Tariffs are a smokescreen to Trump's real endgame

Behind market volatility and tariff threats lies a deeper strategy. Trump’s real goal isn’t trade reform but managing America's massive debts, preserving bond market confidence, and preparing for potential QE.

The super tax and the defined benefits scandal

Australia's superannuation inequities date back to poor decisions made by Parliament two decades ago. If super for the wealthy needs resetting, so too does the defined benefits schemes for our public servants.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Getting rich vs staying rich

Strategies to get rich versus stay rich are markedly different. Here is a look at the five main ways to get rich, including through work, business, investing and luck, as well as those that preserve wealth.

Latest Updates

SMSF strategies

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Superannuation

The huge cost of super tax concessions

The current net annual cost of superannuation tax subsidies is around $40 billion, growing to more than $110 billion by 2060. These subsidies have always been bad policy, representing a waste of taxpayers' money.

Planning

How to avoid inheritance fights

Inspired by the papal conclave, this explores how families can avoid post-death drama through honest conversations, better planning, and trial runs - so there are no surprises when it really matters.

Superannuation

Super contribution splitting

Super contribution splitting allows couples to divide before-tax contributions to super between spouses, maximizing savings. It’s not for everyone, but in the right circumstances, it can be a smart strategy worth exploring.

Economy

Trump vs Powell: Who will blink first?

The US economy faces an unprecedented clash in leadership styles, but the President and Fed Chair could both take a lesson from the other. Not least because the fiscal and monetary authorities need to work together.

Gold

Credit cuts, rising risks, and the case for gold

Shares trade at steep valuations despite higher risks of a recession. Amid doubts that a 60/40 portfolio can still provide enough protection through times of market stress, gold's record shines bright.

Investment strategies

Buffett acolyte warns passive investors of mediocre future returns

While Chris Bloomstan doesn't have the track record of his hero, it's impressive nonetheless. And he's recently warned that today has uncanny resemblances to the 1990s tech bubble and US returns are likely to be disappointing.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.