1 July 2014 saw the commencement of the new
administrative penalty regime, introduced to give the ATO options
for trustees who breach the Superannuation Industry
(Supervision) Act 1993 that are not as extreme as making the
However, the October 2014 case of Deputy Commissioner of
Taxation (Superannuation) v Graham Family Superannuation Pty
Ltd  FCA 1101 and the January 2015 case of Olesen v
Early Sunshine Pty Ltd  FCA 12 suggest that perhaps
those rules were not necessary, as there was already power to
financially penalise trustees of SMSFs for certain breaches.
In Graham's case the conduct that gave rise to the
penalties occurred between August 2007 and February 2013, and
80 loans from the SMSF to the members;
allowing the members' children to live rent free in
residential property owned in the SMSF; and
late lodgement of returns.
The directors of the corporate trustee of the SMSF were ordered
to pay monetary penalties totalling $40,000, and contribute $10,000
to the costs of the ATO.
The directors were also disqualified from being trustees or
responsible offices of corporate trustee of superannuation
entities. However, the ATO did not make the SMSF non-complying.
In the Early Sunshine case, the trustees were also
guilty of committing similar breaches. Over a 4 year period, the
trustee made a significant number of small unsecured loans
totalling $553,568.20 to a company controlled by the members of the
SMSF. No interest was charged on any of these loans, each of which
was repaid in full in a matter of a few weeks.
The trustee also made a $2,000 loan to another related entity of
the SMSF. This loan was also unsecured but interest was paid at
8.5% per annum.
Each director of the corporate trustee of the SMSF was
personally ordered to pay monetary penalties totalling $13,000 and
contribute $5,000 to the costs of the ATO.
The penalties imposed could have been much higher (up to
$220,000 per breach) but, as the parties co operated with the ATO,
there was no loss of capital and the SMSFs were wound up, lower
penalties were considered appropriate.
These cases are a reminder of powers that exist to penalise
trustees, which, although infrequently used, are still available
even for breaches prior to 1 July 2014.
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