A technical expert has warned trustees may potentially face triple punishment if they are caught breaching the COVID-19 early super release measure particularly when the transgression is made in the 2020/21 financial year.
According to SuperGuardian education manager Tim Miller trustees who are not eligible to access their super early under the coronavirus financial hardship measure but do so will firstly suffer from an increase in the administrative penalty unit amounts.
“Our wonderful penalty units have gone up, due to the CPI (consumer price index), from $210 to $222 from any breaches that occur post 1 July 2020,” Miller noted.
“So if the trustees pay a benefit out to somebody who is not entitled to receive a benefit then that is a breach of the operating standards of the fund and that’s subject to up to 20 penalty units which is basically a $4500 ($4440) penalty after 1 July,” he explained.
Miller pointed out this could in turn lead to more trustee pain because any penalty of this nature must be paid by the individual trustee or corporate trustee of the SMSF and not the fund itself.
“And so what we want to make sure we avoid is a situation where people then go and take that penalty out of the super fund thereby taking benefits and creating further breaches and further penalties. So it’s really important to make sure that people do the right thing,” he said.
Further Miller noted a members using the early release of super measure while ineligible to do so could suffer adverse tax outcomes as well.
“If you’ve got any clients or had anyone who has taken money out [of their SMSF] without that ATO approval then that money will be assessed as normal assessable income, even if the money is put back into the superannuation fund,” he said.
“So you get the triple whammy of not actually having the proceeds out of super, you’ll then potentially have the admin penalties as well but then a tax liability personally.
“It means all of these triggers are what we need to be discussing with clients to make sure they do the right thing.”''