Self Managed Superannuation- Obligations of Trustees – Update
The Administrative Appeals Tribunal recently handed down a decision that will make every trustee of a self managed super fund sit up and take notice, particularly those funds that have been set up with a husband and wife as trustees.
The decision was based upon a husband and wife who had a self managed superannuation fund together and who, after being married for 12 years had been divorced. The fund continued to operate and the wife agreed to allow her husband to continue to manage her financial affairs, act as her tax agent and further allow the self managed fun to continue to operate with both remaining as trustees.
After the divorce, the husband breached some of the rules of administering a self managed superannuation fund including removing money from the fund before reaching the required age where members are able to access their superannuation.
It was found that the husband had taken around $3.4 million out of the fund transferred the funds to an overseas bank account.
His wife claimed she was unaware of this nevertheless the actions of her husband meant that the tax commissioner issued the fund with a default assessment notice demanding payment of tax for the money that had been withdrawn. The notice demanded payment of $1.5 million in tax. The tax commissioner also issued a penalty of $1.4 million.
Claiming to have no knowledge of her husband’s actions, the wife fought against the tax and penalty demanding that she should not be held accountable.
The AAT found “that any appearance of unfairness to her as an individual should not obscure the nature of the fund itself, the role of trustees or the regulatory regime within which they function.”
The trustees of self managed funds each have an obligation to ensure that they act with the due care and diligence required to keep the fund compliant with the relevant superannuation taxation legislation. It is essential that all trustees are aware of the investments and actions of the fund.