SMSF Trustee fined $40,000 for 30 separate breaches of SIS Act … a new benchmark for Trustee fines

A Trustee of the Felix Super Fund has been fined $40,000 for over 30 separate breaches of the SIS Act and has been ordered to pay the ATO’s costs of $14,000.  Over a number of years, the Trustee borrowed from his SMSF – sometimes repaying the borrowed amounts and then reborrowing them again.  Effectively the SMSF was his personal ATM.  The Trustee attempted to disguise some of the borrowings.  In response to an auditor contravention report, the SMSF was selected for an ATO audit and the extent of the borrowings became apparent.  The Court held there were contraventions of s62 (sole purpose), s65 (lending) and in-house asset provisions.

Relevant factors taken into account by the Court were the repetition and consistency of the contraventions, the attempt to disguise some of the borrowings, and the Trustee’s awareness that the borrowings were in breach of the SIS Act.  However, balancing these factors were the Trustee’s co-operation with the ATO and the fact that he had personal issues.

The case does set a new benchmark for Trustee fines.  As the case only involved Rodriguez, the involvement (if any) of the other trustee was not considered.  Rodriguez [2016] FCA 860.

Source: Townsends Business & Corporate Lawyers