How the penalties are calculated

Administrative penalties are set as a number of penalty units, and the dollar value of a penalty unit is fixed by the Commonwealth and updated periodically. From 1 July 2026 a penalty unit is $364, up from $330 previously. Each type of breach carries a set number of units, so the fine is the number of units multiplied by the unit value.

What different breaches cost

The number of penalty units reflects the seriousness of the breach. At the top, breaches such as lending to members or relatives, prohibited borrowing, and breaching the in-house asset rules carry 60 penalty units — $21,840 at the current value. Failing to meet certain operating standards can carry 20 units, or $7,280. Record-keeping failures, such as not keeping proper accounts or minutes, carry 10 units, or $3,640. Lesser administrative failures carry 5 units, or $1,820.

The penalty multiplies with individual trustees

Where a fund has individual trustees, the penalty for a breach is generally imposed on each of them separately. A single breach carrying 60 penalty units in a fund with two individual trustees can mean $21,840 each — $43,680 in total for one contravention. With a corporate trustee, that category of penalty is generally imposed once on the company, though the directors remain responsible for paying it.

Penalties cannot be paid from the fund

Administrative penalties cannot be paid or reimbursed from the fund's assets. They must be paid personally by the trustees or directors. Allowing the fund to pay would reduce members' retirement savings and blunt the deterrent, so the cost falls directly on the individuals responsible.

A hypothetical example

Consider a hypothetical fund run by two friends, Leo and Ava, as individual trustees. The fund breaches the borrowing rules through an arrangement neither realised was prohibited. The breach carries 60 penalty units. Both are penalised separately, so together they face $43,680, payable from personal savings and not from the fund.

Penalties rarely apply in isolation

An administrative penalty is often one part of the ATO's response. For the same breach, trustees may also receive a rectification direction requiring them to fix the problem, and an education direction requiring completion of an approved course. Where a breach also creates a tax issue — for example, non-arm's-length income taxed at the top marginal rate, or an illegal early Withdrawal included in a member's income — those costs stack on top of the administrative penalty.

What the penalties apply to

These penalties apply to breaches of the rules rather than to Investment losses or fund underperformance. They relate to matters within a trustee's control, such as understanding the main prohibitions and keeping orderly records.

Factors that affect the penalty outcome

Rectifying a breach promptly and making a voluntary disclosure are factors the ATO takes into account and can support a reduction or remission of the penalty. The Trustee structure, individual versus corporate, also affects how some penalties are applied across multiple trustees.