Over the last couple of years there has been a huge increase in the number of Self-Managed Super Funds (SMSF) trustees and directors of SMSF trustee companies that are being declared disqualified persons by the Australian Tax Office (ATO). Many do not realise the substantial adverse implications that are associated with dishonest conduct as they don’t comprehend how disqualification could impact their professional or personal reputation.
What exactly is the definition of dishonest conduct? The term ‘dishonest’ is not defined in the Superannuation Industry (Supervision) Act (SISA) and therefore takes on its ordinary meaning. The Criminal Code Act 1995 (Cth) provides an interpretation, albeit in a different context, defining dishonesty by reference to the ‘standards of ordinary people’.
The taxation’s annual report indicates that 585 SMSF trustees were disqualified in 2013/2014 this is a 33 per cent increase from 2013, when 440 trustees were disqualified. This figure has almost doubled since 2012.
The ATO has recently implemented a more broad case selection model to better target SMSFs with current issues, leading to higher chances of disqualification and non-compliance. This is why it is important for SMSF trustees to ensure they comply with superannuation legislations; it is highly advised that you hire an advisor to assist with your SMSF finances. Here at Grange we deal with SMSFs and their trustees on a daily basis and have the education and experience dealing with complicated SMSF situations.
There has been increased pressure for disqualified persons to bare the status of “disqualified” as the ATO loses confidence in the individuals running a fund due to dishonest conduct. Technically a disqualified individual should cease to be a trustee or director immediately and has up to six months to appoint an approved trustee in their place or roll over their benefits to large superannuation fund, such as an industry or retail fund. Do you know who you would appoint if you found yourself in this situation?
This decision can be complicated where the member has selected investments that they wish to maintain. Many approved trustees will mainly want to invest in readily traded investments and may not want to retain assets such as residential or business real property or specific investments in private unit trusts.
The growth of social media has resulted in disqualifications impacting on a person’s reputation. Details of a disqualification may be accessible via a search engine which can impact job prospects, connections and friendships. By having this information so readily available it can affect how friends or colleagues view you as a person, impacting working and social relationships.
In the official ATO notice of disqualification it states that “You’re not a fit and proper person to be an SMSF trustee/director”. This is definitely not a status you want attached to your name. If you need advice or help managing your SMSF please contact Grange Business Partners, we are more than happy to help.