Illegal early release of superannuation
Individual taxpayers are only allowed to access their superannuation once they have met a condition of release (e.g. turned 65, turned 60 and retired, reached preservation age and retired with no intention to be gainfully employed, has permanent incapacity or has a terminal medical condition).
A SMSF trustee that releases superannuation funds early (i.e. before a condition of release has been met) may be disqualified as trustee, have administrative penalties imposed or may be subject to prosecution. Furthermore, the SMSF may be made non-compliant (i.e. SMSF will then pay tax at 45% of its income and on the value of its assets in the year of non-compliance) – quite severe consequences.
If you have been approached by promoters promising that they can help you access your superannuation early (for a fee), we would strongly suggest that you do not sign any documents or provide them with any of your personal details. Contact your Nexia representative so that we can alert the ATO about this unlawful behaviour.
Penalty relief for small businesses from 1 July 2018
The ATO can impose fixed administrative penalties on taxpayers that make false or misleading statements on their tax returns (e.g. if they claim excessive deductions to which they are not entitled or do not declare all income they have earned) that may result in a shortfall amount (i.e. the difference between the correct tax liability and the liability worked out using the wrong information).
The amount of the penalty is fixed depending on the amount of “culpability” the taxpayer exhibited when filling in the tax return:
- 25% of the shortfall amount for taxpayers failing to take reasonable care (e.g. did not act like a reasonable person when completing a tax return);
- 50% of the shortfall amount for taxpayers acting recklessly (e.g. suspected that there would be real risk of a shortfall amount arising in a tax return but disregarded this risk); or
- 75% of the shortfall amount for taxpayers acting with intentional disregard of the law (e.g. fully aware of the clear tax obligation but disregarded the obligation)
However, for ATO audits after 1 July 2018, no penalty will be imposed if certain individuals or entities with a turnover of less than $10 million (e.g. small businesses, SMSFs, strata title bodies, not-for-profits or co-operatives) made inadvertent errors when completing their tax returns and activity statements because they did not take reasonable care or took a position that was not reasonably arguable.
Because such penalty relief will only be available once every 3 years, penalty relief will not be available if, in the last 3 years, the taxpayer:
- had penalty relief applied;
- was penalised for reckless or intentional disregard of the law;
- evaded tax or committed fraud or was involved with another entity that evaded tax; or
- engaged in Phoenix activity.
Furthermore, penalty relief will not be available for mistakes made in FBT returns or mistakes regarding the superannuation guarantee.
Please contact us if you have been subject to a penalty so that we can assist you in dealing with the ATO. We may be able to have your penalty remitted in full or partly depending on your circumstances (e.g. your compliance history and whether tax was deferred or avoided).