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 corporate trustee of an SMSF is disqualified if:

  • 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.

Penalties
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

If you need any assistance with SMSF, give The Quinn Group a call on 02 9223 9166 or submit an online enquiry.

By Patrick Lopes

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