What approach should I take with the ATO when my SMSF has a compliance issue?

By Julie Hartley, Townsends Business and Corporate Lawyers

April 19 2016
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To err is human and it is the ATO’s job to make sure trustees understand when they have done something wrong and why it happened. So while trustees may get nervous knowing the regulator is coming to knock on their door, here’s a list of ‘dos and don’ts’ to help in dealing efficiently with the ATO.

What approach should I take with the ATO when my SMSF has a compliance issue?

Do

• remain aware of the affairs of the SMSF;

• engage with the ATO early and make a good impression on them;

• identify the relevant issues, including reasons for the contravention and measures either in place or planned to rectify it;

• have a look through the wealth of precedent material available through the ATO website and identify what the ATO might use to make their determination. This directs attention to the relevant issues and enables trustees to hold the ATO to public statements, ensuring the ATO is consistent in their treatment of all trustees;

• if possible, voluntarily disclose the contravention. Self-reporting gives a good first impression and will be favourably looked upon by the ATO; and

• when preparing a response to the ATO, match the precedent material, ensuring that all factors that the ATO says they will consider are covered by the response.

Don't

• ignore the ATO or put it in the 'too hard' basket! If the ATO issues the SMSF with correspondence or a penalty notice, respond to them as quickly as possible;

• provide an unnecessarily lengthy response – keep it simple;

• claim hardship and hope the ATO will go away. The ATO will not automatically be less harsh because a person claims hardship – it has to be a factor to consider under the law so make out the facts of the case clearly;

• blindly send a response. Have the adviser for the SMSF 'test' any response written before it is sent to the ATO. This will make sure that it is suitable for the ATO;

• forget that there are some words that have a technical meaning which is not the same as the ordinary meaning. It is important to ensure the message that is intended is not lost in translation;

• ignore the precedent material – it can be exceptionally helpful and will ensure that all relevant factors are addressed and the response can be understood by the ATO; and

• try to deflect responsibility by telling the ATO you know nothing about the issue because someone else (spouse, parent, accountant, financial planner) looks after the SMSF. This response will guarantee you are given an education direction and perhaps be disqualified in the meantime.

Julie Hartley, solicitor, Townsends Business & Corporate Lawyers

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