I was interested to read on the ATO’s website this week an updated Superannuation Prosecution Strategy in relation to issues and risks attached with superannuation and taxation law.
The strategies available to the ATO to address non-compliant behaviour of taxpayers may be:
- administrative (for example, conducting an audit, raising a default assessment, imposing a penalty, non-compliance of a self managed superannuation fund); or
- by prosecution (including civil and criminal offence).
The most appropriate options for the ATO in dealing with non-compliant behaviour is dependent on the circumstances of each case.
For SMSFs, the Commissioner has additional options for prosecuting contraventions of the civil penalty provisions as a civil or criminal offence (s.193, SIS Act). Generally the matter can be treated as a criminal offence where dishonesty or deceit is involved. The distinction between a criminal and civil offence is that many criminal offences may lead to imprisonment, while a breach of a civil offence carries a monetary penalty only. Some criminal offences also carry a monetary penalty. Accordingly, the distinguishing feature of a criminal and civil matter is the requisite standard of proof – in a criminal matter the standard of proof is ‘beyond reasonable doubt’, while for a civil matter it is ‘on the balance of probabilities’.
Excess Contributions Tax
The most interesting element of this publication was the focus of the “Superannuation Prosecution Plan for 1 July 2011 to 30 June 2014″. This report outlined how the ATO intend to further target issues of excessive contributions including where SMSF members seek to avoid or reduce their excess contributions tax liability by:
- falsely reporting contributions — including amending amounts reported;
- including misleading valuations of in-specie contributions falsely;
- amending their personal income tax returns to enable a superannuation contribution deduction;
- superannuation funds whose reporting has been falsely amended to reduce an individuals excess contributions tax liability; or
- where fraud and other criminal offences are detected.
Ongoing issues of ECT only highlight further the importance of understanding the mechanics of how the contribution caps operate. The penalties for trying to avoid excess contributions tax may end up a lot worse than the original tax liability!!
Find out more about the updated ATO Superannuation Prosecution Strategy