Court orders issued over early release scheme

The ATO filed an application for the order on 18 October 2018 seeking declaratory relief, a final injunction and payment of a civil penalty against the respondent in respect of an alleged contravention of s 68B(1) of the Superannuation Industry (Supervision) Act 1993 (Cth).

The ATO is alleging that the respondent, Ms Pavihi, contravened s 68B(1) of the act by promoting to trustees or intended trustees of SMSFs a scheme that resulted, or was likely to result, in an early release of funds from an SMSF that was not permitted by law.

Section 68B of the act states that a person “must not promote a scheme that has resulted, or is likely to result, in a payment being made from a regulated superannuation fund otherwise than in accordance with payment standards prescribed under subsection 31(1)”.

The ATO has provided evidence to the court in relation to 34 SMSFs and has identified a further 41 SMSFs as “suspicious and potentially involving the respondent”.

In an affidavit provided to the court, ATO compliance investigations officer Raleigh Agdaca provided detailed evidence on four specific SMSFs.

Mr Agdaca stated that some of the common features in each of the four cases include the establishment of an SMSF with the involvement of the respondent, the rollover of superannuation benefits from an industry superannuation fund into the SMSF, and the withdrawal of almost all the benefits from the SMSF.

The four cases also involve the use of the monies withdrawn from the fund by the beneficiaries for various personal purposes, such as funding renovations, paying stamp duty on the purchase of a house, and assisting family members financially.

In each instance, Mr Agdaca also claims that the respondent was paid fees in the sum of $2,000.

In his affidavit, Mr Agdaca warned that by withdrawing funds from SMSFs for personal purposes, the trustees and beneficiaries of the funds could potentially be exposed to a range of additional taxation liabilities.

Based on the evidence provided in the affidavit, Justice Wheelahan said it appears that each of the four SMSFs were established for the benefit of vulnerable individuals that “likely relied upon advice given in relation to the establishment of the funds and relied on a representation they were entitled to withdraw monies from the funds for various purposes”.

In the judgement, Mr Wheelahan stated that, base on the evidence, there is a reasonably strong prima facie case that the respondent has promoted SMSF schemes with the object of having payments made from those funds otherwise than in accordance with payment standards prescribed under s 31(1) of the act.

A case management hearing will take place on 30 November 2018.