Financial Planning, Strategy

Aussiegolfa case sends advice warning

The Aussiegolfa case serves as a reminder to take care over advice given.

The full court of the Federal Court’s ruling in favour of the appellant in Aussiegolfa Pty Ltd (Trustee) v Commission of Taxation should be seen as a sign for advisers to take care over recommending certain strategies to SMSF clients, a sector lawyer has said.

“In a practical sense, this case makes me think it’s very relevant when everyone in this room gives advice because you can think you’re giving the right advice and it could be quite some time before you actually get to an important, high enough decision-maker who has thought about it enough to give it a considered position,” DBA Lawyers special counsel Bryce Figot said at the firm’s latest SMSF strategy seminar in Sydney today.

“Isn’t it incredible that three judges overrode Justice Pagone. He was the judge who heard the case initially and ruled [Aussiegolfa] had contravened the sole purpose test.

“And it’s not like he had to look at this in a hurry. He had informed arguments from barristers from both sides … senior counsels on both sides and he said [the situation] contravened the sole purpose test.”

Figot described the full court of the Federal Court’s decision to overturn the original verdict as a tremendous about-face.

“So I think the thing we have to remember when we give advice to clients we believe is the right advice is there is always a danger that people disagree and it could take quite some time to get that properly ventilated,” he said.

“I think we really need to emphasise that risk to clients because honestly how many clients would give up their legal rights because pursuing it through the court system is too hard, too risky and too difficult, especially when we’re talking about SMSFs where people are nearing or in retirement.”

According to Figot, the ruling means the interpretation of the sole purpose test has reverted back to what was considered conventional practice.

Further, he pointed out it was determined whether the super fund owned a property where a related party lives or runs their business is irrelevant with regard to satisfying the sole purpose test.

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