With the ATO making clear its stand on administrative penalties, directors of SMSF should be cautious about their actions involving the fund to avoid breach of obligations under the Superannuation Industry Act.
Take a look at a recent case involving the Alisar Superannuation Fund. The Fund has a corporate Trustee. The Trustee company, in addition to acting as trustee for the Superannuation Fund, also acted as trustee for the Canada Trust. The Canada Trust is a discretionary trust and the beneficiaries are the applicant, Mr Bullock, and their two daughters.
The fund’s primary asset was a parcel of land located in Dundee Beach, Northern Territory. The SMSF leased the land to a related family trust. This trust owned properties on the land, which were considered as improvements by the tenants under the lease.
To finance the cost of the construction and repairs in the properties situated on the SMSF’s land, the trustee transferred money out of the Superannuation Fund into a personal account held by Mr & Mrs Bullock. From the Personal Account, the money was transferred to the contractor.
In the aftermath of a fire, Mr & Mrs Bullock accessed the Superannuation Fund as a short-term financial support, until the insurance company could fully reimburse them. According to the Mr & Mrs Bullock, the advice from their accountant was that it was possible to access the Superannuation Fund under hardship provisions. Because the property was destroyed in a fire and needed urgent repairs, the director of the fund’s argument was that the withdrawal of funds was made as an ‘emergency fund’.
The director’s argument was rejected by the Tribunal. Instead, the Tribunal upheld the Australian Taxation Office’s view that the withdrawal of money from the fund was to be considered ‘loans’, making it a breach of certain obligations under the Superannuation Industry Act 1993.
To know more about this case, watch Effective PD’s webinar on SMSF Breaches. Subscribe to Effective PD’s webinar. Visit www.effectivepd.com.au. Effective PD offers an innovative way for busy accountants to be on top of their game with continuing professional development in a brief, flexible and easy way.
