In Olesen v Early Sunshine Pty Ltd  FCA 12 the Court found that the SMSF, the George MacDonald & Sons Pty Ltd Superannuation Fund, had made a series of loans to related companies, totalling $553,568.20 over a period of four years. Most of the loans were unsecured and paid no interest, except for loans to one related company which paid 8.5% per annum. Each of the loans was repaid, “typically, the loan was outstanding for only a few weeks at a time.” All of the loans were less than $20,000.
Disqualified persons are not allowed to be the trustee of an SMSF, or to be the director of the corporate trustee of an SMSF. Continuing to be the trustee of an SMSF while being a disqualified person can result in fines or even jail time.
How does someone become a Disqualified Person?
There are four reasons a person may become a disqualified person:
- They have been convicted of an offence involving dishonesty
- They were subject to a civil penalty order
- They are ‘insolvent under administration’, including being:
- an undischarged bankrupt
- have executed a personal insolvency agreement
- They have been disqualified by the Commissioner of Taxation.
The ATO has a number of options available to deal with SMSF compliance breaches:
- Education Directions
- Rectification Directions
- Administrative Penalties
- Enforceable Undertakings
- Allowing an SMSF to wind-up
- Disqualifying Trustees
- Freezing SMSF assets
- Issuing a Notice of Non-Compliance
- Civil and Criminal Penalties