Trustees of Self-Managed-Superannuation Funds (SMSF) beware! In a recent case, the Federal Court found that the trustees of a SMSF made unauthorised withdrawals from their fund, thereby contravening the Superannuation Industry Supervision (SIS) Act 1993. The trustees of the SMSF were a husband and wife who were the only members of their SMSF. The members of the fund had withdrawn significant amounts from their SMSF over a 4 year period (2009, 2010, 2011 and 2012 financial years) to meet their living and borrowing expenses following the failure of a business that they had owned.
These members’ loans were unsecured, had no interest rate and no repayment term. Inaddition, the Income tax returns and auditor reports lodged on the SMSF’s behalf raised the possibility of contraventions of the SIS Act for the four financial years in question and the Commissioner conducted a further audit of the fund. The ATO concluded from that audit that there were several contraventions of the SIS Act in relation to the management of the fund. The Commissioner disqualified each of the trustees from being a trustee of a superannuation entity under SIS Act section 126A and subsequently commenced proceedings for contraventions of the SIS Act.
As a result of the above findings, the Court held that the contraventions were serious and imposed civil penalties on the trustees. The appropriate pecuniary penalty was held to be $20,000 for each of the trustees.
Ultimately, the trustees transferred what remained of their benefits in the SMSF to a public fund.
In conclusion, before making any decisions to access your superannuation we strongly suggest you speak with your financial adviser; a simple phone call could save you thousands!
You can contact the team at McPhails on 03 9898 9221.