In an earlier blog I pointed out my concern with the ATO's treatment of the excess contribution tax issue. The ATO has taken a very strict approach, arguing (quite correctly) that the current law provides no flexibility when it comes to imposing penalties for non-compliance.
The issue of the inflexibility of the penalty regime, not surprisingly, was taken up in the latest report from the Cooper Review. Their recommendation is to adopt a "speeding ticket" model - that is, an administrative penalty could be imposed by the ATO on trustees (rather than as a tax on the fund) on a sliding scale, depending on the seriousness of the breach. The trustee would then have a right to seek internal review by the ATO, or ultimately contest the penalty in court.
This approach was seen as preferable to the approach adopted in other areas under the Taxation Administration Act.
Either approach would certainly be better than the regime that presently exists. And it does make sense to penalise the trustee rather than the fund (albeit that in many cases the member will ultimately lose out). What will be interesting (assuming this recommendation is adopted) is to see how prescriptive the regulations will be, and how much discretion is given to the ATO.
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