Trustees tend to think of compliance risk in the abstract. It is more useful to look at the actual numbers, because they are specific and they are personal.
Administrative penalties
The ATO can impose administrative penalties for a defined list of breaches. They range from 5 to 60 penalty units depending on which rule was broken. For offences committed after 7 November 2024, that works out to roughly $1,650 at the low end and $19,800 at the high end.
Three features make this bite harder than people expect.
They are personal. The penalty is imposed on the trustee, and it must be paid from personal money. It cannot be paid or reimbursed from the fund. Doing so creates a second breach.
They apply per trustee. With two individual trustees, a single breach can produce two penalties. This is one of the practical arguments for a corporate trustee, where the penalty is imposed once on the company, although the directors are jointly and severally liable for it.
They are close to automatic for the listed breaches. The ATO has remission discretion, but a trustee who has done nothing to fix the problem is not in a strong position to ask for it.
The other consequences
Administrative penalties are usually not the worst outcome.
Auditor contravention reports. Your auditor is required to report specified contraventions to the ATO. Once reported, your fund is in front of the regulator.
Non-arm's length income. Income tainted as NALI is taxed at 45 per cent rather than 15 per cent.
Disqualification. For serious or repeated breaches the ATO can disqualify a person from acting as a trustee of any SMSF. Disqualified trustees are named on a public record. If both members are disqualified, the fund cannot continue in its current form.
Non-complying status. The most serious outcome, reserved for the worst cases, results in the fund being taxed at the top marginal rate, potentially including on its total assets. It is rare, and it is catastrophic when it happens.
Enforceable undertakings and education directions. The ATO can also require trustees to complete an approved education course and provide evidence of it.
The pattern worth noticing
Almost every serious outcome in that list starts with something small that was not dealt with. A late return. A loan that was going to be repaid next month. A valuation nobody got around to. A related party lease that was never actually documented.
The gap between a small problem and an expensive one is usually months of not looking at it.
If something in your fund is not right, the cheapest day to deal with it is today, and the ATO's response to voluntary disclosure and rectification is meaningfully different from its response to detection.