The Australian Taxation Office (ATO) has formally clarified its stance on the enforcement of penalties for superannuation funds that fail to adhere to tax liabilities brought about by breaches of the contributions caps.
In situations where a breach of the contributions caps has occurred and triggered a tax liability, a release authority is issued to the superannuation fund in question to facilitate payment of the liability.
In situations where compliance with these release authorities is not forthcoming, the ATO has the power to impose further financial penalties on the relevant fund or non-complying person.
However, an ATO practice statement, PS LA 2011/24, has clarified the discretionary relief powers the tax office has in these situations as well as how it will apply them.
As per the practice statement, full remission of the penalty will be considered if the individual or superannuation provider has made a genuine attempt to comply with the release authority. In this situation the ATO would consider whether or not the person or fund took action to understand the obligation and whether or not there were any circumstances beyond the person's or fund's control that prevented their compliance. The speed at which rectification of these errors was performed would also be relevant.
The ATO will also look at reducing the penalty by either 75, 50 or 25 per cent if it can be established a moderate attempt to comply with the release order was made. Important elements here would be if the action taken fell just short of a genuine attempt at complying, but was not done so in a deliberate attempt to avoid compliance, as well as the speed of correction.
If the tax office deems no attempt was made to comply with the release authority, the full penalty will be imposed.
