A legal specialist has recommended advisers present a factual case to the ATO supporting the most favourable outcome for the SMSF trustees in the event of a situation that, on face value, could be seen as the illegal early access of member benefits.
Speaking at the SMSF Association Technical Summit 2024 in Sydney today, Bobbin Lawyers consultant lawyer Peter Bobbin recognised the classification of benefits exited early from an SMSF can be pivotal in determining the severity of any regulator-driven sanctions over compliance breaches.
“An early illegal release, I tell you, smells much better and much sweeter if it is in fact [treated as] a loan. And a loan smells sweeter still if it’s in fact not a loan but a mistake,” Bobbin told event delegates.
“Turning an illegal early release from at least one of the SMSF’s trustees into a fraud, into a breach of fiduciary duty, protects them. So protecting one of your clients may be just what’s needed.”
According to Bobbin, advisers and trustees must keep in mind there is no obligation to admit the withdrawal of monies from an SMSF in error actually constitutes the illegal early release of member benefits.
“The tax office is not a confessional so don’t think [suggesting] this factual circumstance of your client is moral [and pleading not treat the incident] as non-complying [will be a] failure. Don’t bother,” he said.
He pointed out the key to managing situations regarding illegal early access of super monies is establishing the truth and preparing the evidence involved very carefully.
“When you do that and if the tax office can see this is a just outcome, it will agree with you. [The regulator] will never agree with you, by the way, it will just agree not to fight you and it’s a win-win as a result.
“A no further action letter, it’s a nice thing to get.”
