A decision to disqualify a director of a corporate trustee of a self-managed superannuation fund (SMSF) due to several breaches of the Superannuation Industry (Supervision) Act 1993 (SIS Act) was recently upheld by the Administrative Appeals Tribunal (AAT). The SMSF breach of rules was originally decided on in 2019 but was appealed.
- The ATO is authorised to disqualify the responsible officers of a corporate trustee of an SMSF if they fail to fulfil the legislative standards of conduct enforced by the SIS Act.
- The late lodgment of yearly tax returns may constitute a ‘serious contravention’ in specific circumstances.
- In determining whether disqualification is justified, deliberation of the nature, number and seriousness of the contraventions is necessary.
- The Tribunal asserted that the “prudent management” of individual funds constitutes the “immediate object” of the SIS Act.
History – SMSF breach
In August 2019, the Deputy Commissioner of Taxation applied disqualification to Mr Goulopoulos and his wife due to severe breaches of the SIS Act on multiple occasions. These included:
- Depleting the SMSF by nature of 18 withdrawals totalling $665,990.86 to fund the purchase of a new property and a new vehicle
- Not meeting conditions of release and thus illegally accessing super
- Failure to lodge annual returns for four years
The trustee’s conduct also resulted in breaches of borrowing and in-house asset provisions of the SIS Act, in addition to the requirements regarding acquiring assets from a related party.
Mr Goulopoulos subsequently appealed the decision.
Decision – SMSF breach
After considering all the circumstances, the Tribunal formed the opinion that Mr Goulopoulos was not a proper and fit person to remain as a trustee of an SMSF. The Tribunal ruled that Mr Goulopoulos sought to downplay his infringing conduct, which warranted his disqualification.
Mr Goulopoulos proposed to complete an education course, instrument strategies to circumvent future infringements and provide an enforceable undertaking to cease the behaviour in breach of the SIS Act. The Tribunal determined that adopting these options was unlikely to reduce the risk of future breaches.
The Tribunal held that Mr Goulopoulos “preferred to take actions that suited his convenience and comfort”, committing severe contraventions of the SIS Act and opposing the standards expected of a responsible officer.
AAT Deputy President Ian Molloy vetoed Mr Goulopoulos’ claim that he relied on the advice postulated by his accountant, who, according to Mr Goulopoulos, “planted the seed” to pursue the opportunity of withdrawing funds from the SMSF.
Though the Tribunal recognised that Mr Goulopoulos expressed some remorse for his actions, it determined that he failed to admit to the indecorous nature of his conduct.
The Tribunal also accepted the submission of the Deputy Commissioner concerning the failure of Mr Goulopoulos to certify that the SMSF complied with the sole purpose test required by the SIS Act.
This case highlights the exacting standards expected of a director of a corporate trustee of an SMSF. Trustees or Directors of superannuation entities need to be conscious of their statutory obligations and comprehend the severe ramifications of ignoring such commitments.
The intention of the content of this article is to provide a general guide to the subject matter. You should seek specialist advice about your specific circumstances.
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