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ATO, Compliance & Regulation

ATO clarifies penalty stance

ATO SMSF trustee penalties

ATO case officers must have defensible reasons for imposing multiple penalties on an SMSF trustee, new guidelines have revealed.

The ATO has advised its staff to consider why an SMSF trustee may have carried out multiple breaches of their obligations and if penalising those breaches would be a defensible position as part of recently released penalty guidelines.

The internal staff guidelines, known as Practice Statement Law Administration (PSLA) 2020/3, were made public last month and cover the administration of penalties for SMSFs that can be imposed under subsection 166(1) of the Superannuation Industry (Supervision) (SIS) Act 1993.

In a section dealing with determining where a penalty remission is appropriate, the ATO provided guidance as to how it will approach multiple penalties, multiple breaches of the same provision and multiple provisions being breached.

In dealing with multiple penalties stemming from a trustee’s behaviour, the guidance suggested ATO staff: “Consider whether the cumulative penalty is defensible, proper and just, having regard to the overall circumstances of the case.”

A similar tone was taken in regard to multiple breaches of the same provision, which could result in multiple penalties stemming from a single course of conduct or behaviour.

“Such circumstances may warrant penalty remission if the cumulative penalty is considered otherwise inappropriate,” the guidelines stated, referring to an example where a trustee engaged in multiple illegal early release withdrawals, but where the case officer would only apply a penalty to the primary contravention.

The example also made reference to the intention of the trustee when breaching their obligations and noted different scenarios should be identified where a trustee’s knowledge, actions and intentions demonstrated different levels of culpability.

Remitting back to a level reflecting a primary contravention would also be applied where multiple provisions were breached by a trustee, resulting in multiple penalties.

“An unjust result may also occur in situations where multiple administrative penalties are imposed when a particular event results in contraventions of more than one provision,” the guidelines said.

“If one particular event results in multiple penalties under more than one provision, we would generally remit to a level reflecting the primary contravention,” the guidelines stated, adding this would not occur where fraud, evasion or egregious contraventions took place.

Sladen Legal principal Phil Broderick said the release of the PSLA indicated the ATO had softened its stance on multiple penalties compared to previous years.

“When the penalties came out, the ATO took an educative approach and few penalties were issued, but they have been hardening in the last two years and we have seen more penalties for multiple breaches and less remissions,” Broderick said.

“We now have the PSLA and it appears the ATO has considered feedback from the industry and has taken on the fairness and totality principles used in elsewhere in the law.”

In releasing the guidelines, the regulator noted the consistency of the behaviour of an SMSF trustee should be taken into account by its staff when considering the imposition, or remission, of a penalty.

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