Directors of SMSF corporate trustees who have been coerced into that role due to financial abuse should be given mechanisms to report what had taken place and how they were manipulated as a defence against claims they may have breached their legal obligations, the SMSF Association has stated.
The professional body made the call as part of a submission to a Treasury Consultation on Combatting financial abuse perpetrated through coerced directorships.
The industry body noted SMSFs could be used for financial abuse where someone was forced or coerced into becoming a director of a corporate trustee as well as a member of an SMSF along the perpetrator of the abuse.
“Once the SMSF is established, the perpetrator can coerce or even fraudulently rollover of the victim survivor’s superannuation to the SMSF and illegally access the funds, with or without the victim-survivor’s knowledge,” the submission said.
“The prevalence of this occurring within the SMSF sector is unknown, but even one occurrence is one too many and the effects on a victim survivor can be lifelong.”
The paper backed moves to allow victim-survivors to present their side of events to the ATO in the event a breach was uncovered, including access to advice.
“We support the proposal to seek further ways coerced directors can engage with the ATO, including having sufficient time to seek independent advice and provide information to the commissioner where a defence is raised in circumstances involving reasonable claims of coercive control,” the SMSF Association added.
“However, we note that it is likely the victim-survivor may not understand who they should seek advice from or have the means to fund access to the advice. Support should therefore also include helping victim-survivors know who can provide the independent advice they need and how they can access advice if they do not have the financial means, which given the circumstances is highly probable.”
The role of practitioners was also highlighted in preventing financial abuse with the organisation set to release its own guidance.
“Intermediaries, such as professional advisers, can play an important role in identifying and supporting victim-survivors,” the submission noted.
“Where an intermediary clearly ignored their obligations or acted carelessly, they should be held to account for their role in supporting financial abuse through coerced directorships.
“We recommend the government work with experts and groups who focus on preventing family and domestic violence to build an awareness campaign and education to train intermediaries how to identify signs of financial abuse and steps they should take to prevent outcomes like coercive directorship, that importantly support and protect the victim-survivor.”
To enhance levels of education and awareness regarding financial abuse the SMSF Association is in the process of developing a best practice standard for fund establishments.
“The standard will stipulate minimum levels of pre-vetting and require service providers to take active steps to educate prospective SMSF members on the risks of financial abuse. It may also require service providers to undertake minimum levels of training on how to identify signs of coercive financial abuse,” it indicated.
