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The balance of a members account as at 30 June 2021 was negative. The member undertook in April 2022 to contribute an amount to eliminate the negative balance. Would this be a reportable breach - the negative balance amounted to $468. It is likely that the same may occur again in the 2022 financial year. Any comments would be welcome.
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Hi Ronald
My view is that normally this would not be a reportable breach on the basis that it is rectified.
This occasionally occurs when a member has a low balance and life insurance is paid in respect of that member.
Possibly you could argue it is a breach of Regulation 5.08 of SIS in that a member's minimum benefits have not been maintained (in respect of the other members of the Fund as their benefits have been used to Fund another member's life insurance).
If you refer to the ATO's instructions if it was a new Fund it would not be a reportable breach on the basis it is less than $2,000.
My approach would be to report it to the trustees as a breach of Regulation 5.08 of SIS in your annual trustee / management letter. If the same breach occurred in a later year I would lodge an auditor contravention report re the breach.
If other forum member's have a differing view please let the forum know.
Thanks
SMSF AAA