The definition of what constitutes an SMSF contravention is all set to change in the light of the new penalty regime of the ATO. July 1 will alter the chapters of contravention thresholds, but there is no reason to panic as the auditors are registered with the commonwealth agency and they can be trusted.
New penalty regime kicks in
Let us take a couple of instances of the new standard. If a fund is no more than 15 months old and the contravention is equal to or in deficit of $2,000, it does not need to be reported.
Alteration in contravention threshold
For funds older than 15 months, if the value of contravention is less than the 20th part of the fund value (and in addition, is less than $30,000), it does not need to be reported. This implies that if 5% of the fund asset value is more than $30,000, contravention occurring on such fund will need to be reported.
ATO feels change in contravention threshold could not be avoided
ATO has improvised the step of shifting contravention thresholds because it believes the new penalty regime and its own compliance approach will render redundancy to the old thresholds anyway.
And lest I forget, there are new standards pertaining to the separation of money and other assets.
Off the note, how do you see ATO responding to the Inspector-General of Taxation’s review?