Individuals who have been convicted of dishonesty, even for offences occurring outside Australia and in the past, are likely to be permanently barred from serving as an SMSF trustee.
ASF Audits head of education Shelley Banton noted those convicted of dishonest conduct under section 19B of the Crimes Act 1914 in Australia or under a similar law in a foreign country are classified as disqualified persons according to section 120 of the Superannuation Industry (Supervision) (SIS) Act.
Furthermore, the disqualification remains valid regardless of when the offence occurred, including before the SIS Act came into effect.
“The SIS Act doesn’t distinguish between whether the offence was in Australia or another country, but it does generally mean that person is disqualified for life,” Banton told attendees of an ASF Audit webinar yesterday.
“A good example here is AAT (Administrative Appeals Tribunal) Case 60/96, where the AAT confirmed that the individual was a disqualified person because of a serious offence they committed that was involved with a fraudulent insurance claim way back in 1969 in the UK and that was recorded under UK laws.”
Additionally, she pointed out the case demonstrated trustees seeking a reprieve to have their disqualification waived by applying to the AAT are unlikely to receive any relief.
“Unless there’s an exceptional circumstance to allow an application for that disqualification to be waived, then the AAT won’t waive it. In this particular case, that was despite the fact that the person was 21 at the time and had an excellent record ever since that point,” she said.
“So while the commissioner has the power to waive that disqualification where it’s believed the individual is unlikely to be a prudential risk for the fund, the reason that it wasn’t waived in this case is because it was serious dishonest conduct where the penalty for the offence was a term of imprisonment of at least two years.
“So depending on what’s happened in the trustee’s past life, it can come back to bite them later.”
The warning comes at a time when the ATO is stepping up its compliance efforts against non-compliant SMSF trustees, disqualifying over 750 trustees during the 2023 income year, which is more than triple the number disqualified in 2022.