This AAT decision involved Vuong, who was a member of the Equipsuper Superannuation Fund, DBA Lawyers director Daniel Butler explained.
In 2008, Vuong met Brendon Phuong Tran (‘Phuong’), who said Vuong could withdraw his super early subject to a fee of 29 per cent.
Vuong signed a blank form, which was said to be a roll-over form to Nguyen’s Superannuation Fund (‘Nguyen SMSF’). Equipsuper paid $114,697 by cheque in 2008, but the request form had the false address, allowing Phuong to deposit this payment into another person’s account, who was also named Nguyen, Mr Butler stated
“The Nguyen SMSF’s identity had been fraudulently used for this purpose – so it appeared Phuong used another person named Nguyen’s bank account and there was a complying SMSF with Nguyen in the name to allow this deception to be carried out,” Mr Butler said.
Vuong received $81,434, which was the full amount of his super rollover less the 29 per cent paid to Phuong, Mr Butler said.
Vuong’s tax agent “smelled a rat” while preparing Vuong’s 2009 tax return, Mr Butler said, saying it was unlikely it would be super but requested documentary evidence before he could disclose the $81,434 in Vuong’s tax return.
Mr Butler said Vuong did not provide such further evidence and it appears the tax agent did not follow him up as subsequent tax returns were lodged by Vuong via that tax agent without any amendment for FY 2009.
In July 2011, Mr Butler noted the ATO undertook an audit and issued an assessment for the primary tax of around $45,300 on the total superannuation withdrawn of $114,697 plus $11,325. Part of this was a 25 per cent administrative penalty for Vuong and his tax agent not taking reasonable care plus around $2,900 in shortfall interest charge.
The AAT considered that the 25 per cent penalty imposed by the ATO was appropriate, but nevertheless considered that the ATO should use its discretion to fully remit the penalty, stating:
“The Tribunal is nevertheless persuaded that the applicant [Vuong] at all times acted with honest, albeit naïve, intent. He was seeking to access his superannuation early, but by legitimate means.”
“What I found most surprising in this decision was the tax agent’s actions or lack thereof. In particular, there appeared to be no follow up activity in subsequent years,” Mr Butler said.
“I would have considered Vuong’s tax agent should have been more pro-active in seeking a proper understanding of whether the $81,434 was assessable when he initially ‘smelt a rat’ in preparing Vuong’s FY2009 tax return.
“The facts do not go far enough to make a conclusion on this point but I consider that Vuong ‘luckily escaped’ the 25 per cent penalty as failure to take reasonable care can also be imposed when your tax agent fails to take reasonable care.
“Vuong’s naivety and willingness to act honestly finally convinced the Tribunal to remit the penalty. However, a careful review of the decision, leaves you thinking that Vuong was aware of the scheme.”
Where does this case decision leave tax agents? How much enquiry is the tax agent required to make? Who pays the tax agent to smell rats and detect fraudulent activity? The culprits being the taxpayer and the instigator seems to get away with murder!