The Australian Taxation Office (ATO) has raised concerns about a growing trend among self-managed super funds (SMSFs) failing to comply with release authority obligations. A release authority is an official document issued by the ATO to a super fund, authorising the release of money from a member’s account to pay specific liabilities. These liabilities can include excess concessional contributions, excess non-concessional contributions, and Division 293 tax assessments.
Under the law, SMSFs that receive a release authority must act within 10 business days. This means:
- Releasing the requested amount to the member or their nominated account.
- Lodging a release authority statement back to the ATO.
Unfortunately, the ATO is seeing an increase in funds that either do not respond within the required timeframe or respond incorrectly—such as failing to release the correct amount or neglecting to submit the required statement. These errors can lead to significant penalties for the fund and its trustees.
Why Compliance Matters
Release authorities are not optional. They are a legal requirement designed to ensure members meet their tax obligations and maintain the integrity of the superannuation system. Non-compliance can result in administrative penalties and potential scrutiny from the ATO.
What Trustees Should Do
To avoid penalties:
- Put clear processes in place for handling release authorities promptly.
- Ensure your SMSF administrator or accountant understands the 10-business-day deadline.
- Double-check that both the payment and the reporting obligations are met.
If you’re unsure about your obligations or need help setting up compliance procedures, speak to your SMSF adviser or accountant as soon as possible.
