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I am auditing a fund established during the 2023 year. members were issued with Div 293 notice of assessments for $7,500 each in april 2023 with due date for payment 15 May 2023. The members lodged the authority to release with the ATO. However, the fund administrators rejected the authority to release in superstream as they could not confirm the super fund had the proceeds in its bank account. in the meantime the fund changed accountants. The members were going overseas so paid the div 293 amounts from the super fund on 10 May 2023 without receiving the authority to releases ( and not realising they could not do this). The new accountant lodged a paper copy of the request form with the ATO upon receiving notice that the release didn't work for one member (no notice received for the other member so accountant presumed this was ok & was dealt with by the previous accountant), the ATO rejected this deeming it to be a duplicate, the new accountant contacted the ATO & advised them of the situation, the ATO subsequently issued the authority in September 2023. Both Div 293 assessment amounts added together are material, and as this is considered a new fund then I am required to lodge a contravention report? Also, for the member that has not received the authority to release, they need to repay the div 293 amount + interest?
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Hi Lacey
Yes in relation to newly established SMSF's the ATO advises in their Auditor Contravention Report criteria that:
"As at the end of the financial year, if the SMSF is less than 15 months old and there are contraventions, you need to identify if any single contravention has exceeded $2,000. If this is the case, you report all contraventions of the sections and regulations listed in tables 1A and 1B, regardless of the financial thresholds. You apply no further tests."
If division 293 tax has been paid without the authority to release you have a breach of:
Section 65 - "The trustees must not loan monies or provide financial assistance to any member or relative
at any time during the financial year".
Reg 5.08 - "Member minimum benefits must be maintained in the fund until transferred, rolled over,
allotted (to the member’s spouse) or cashed out in a permitted fashion".
Reg 6.17 - "Payments of member benefits must be made in accordance with Part 6 or Part 7A of the
regulations and be permitted by the trust deed".
As the breaches meet the new fund test you would be required to lodge an Auditor Contravention Report.
Yes, in relation to the division 293 tax that has been paid and an authority to release has not been received this should be repaid by the member. Given the relatively low amount owing my view is that it is not necessary to calculate an interest amount owing.
Thanks
The Auditors Institute