Federal court hands down $40k penalty

An SMSF trustee has been hit with a $40,000 penalty and barred from acting as trustee by the federal court for serious contraventions involving unauthorised withdrawals.

SuperConcepts general manager of technical services and education, Peter Burgess, says the superannuation fund involved in this case, Deputy Commissioner of Taxation v Rodriguez, made unauthorised payments from the fund over a seven-year period.

“There were a significant number of withdrawals made from the fund where the client had not met a condition of release,” Mr Burgess told SMSF Adviser.

The court found the trustee had a history of making unauthorised withdrawals. This included 12 unauthorised withdrawals in the 2010/11 financial year, totalling $70,930, which were for the personal benefit and use of the respondent.

In September 2012, the auditor issued an audit report for the 2010/2011 income year and also lodged an audit contravention report. Following this, the ATO notified the respondent the fund had been selected for audit for the period 1 July 2005 to 30 June 2011.

“What is interesting about this case is that it is a timely reminder that under the new penalty regime, unauthorised payments like this are not just a breach of the providing financial assistance rules, but also potentially a breach of the in-house asset rules, which was the case here,” Mr Burgess said.

Mr Burgess said, in this case, the value of the loans or in-house assets were over the 5 per cent limit which meant the superannuation fund had breached not only the financial assistance rules but also the in-house asset rules.

He said breaches of these two sets of rules are two of the most common breaches reported to the ATO.

“Typically, around half of the breaches that are reported to the ATO fall into one of those categories.”

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