The Commissioner of Taxation recently released the annual report for 2013-14 which highlighted an alarming increase in the number of Self Managed Super Fund (SMSF) trustees that were declared disqualified persons by the ATO. A disqualified person is prohibited from being a trustee or director of a corporate trustee. Prior to setting up a SMSF, it is important that you check that you are not disqualified from acting a trustee as significant penalties apply.
Who is considered a disqualified person?
According to section 120 of the Superannuation Industry (Supervision) Act, a person is disqualified from acting as an SMSF trustee if they:
- have been convicted of an offence which involved dishonest conduct
- have been subject to a civil penalty order
- are insolvent under administration
- have been disqualified by a court or regulator
- a responsible officer is a disqualified person
- a receiver, administrator or provisional liquidator has been appointed
- the company has begun to be wound up
Waiver of disqualified person status
An individual can apply to have their disqualified person status waived if they convicted a minor offence. You must write to the ATO within 14 days of being convicted of the offence.
What you should do if you become a disqualified person?
- Remove yourself as trustee/director immediately.
- Notify the ATO and ASIC (if corporate trustee) of your disqualification.
- You have 6 months to either appoint an approved trustee or roll over your benefits to a larger superannuation fund.
Section 126K of the Superannuation Industry (Supervision) Act states the penalties for a disqualified person acting as trustee of an SMSF include:
- criminal and civil penalties (2 years in prison or $10,200 penalty)
- civil penalty of $8,500 if the trustee of the SMSF fails to inform the ATO immediately in writing
By Patrick Lopes