A recent case before the Administrative Review Tribunal (ART) has highlighted that repaying a prohibited loan from an SMSF is not sufficient to prevent action being taken against its trustees by the ATO.
The case of Sherallene Alicer and Joshua Ramos and Commissioner of Taxation [2026] ARTA 342 was heard on 21 February and involved two SMSF trustees who after separating withdrew more than $87,610 from their fund in 58 transactions over the six years from 2017 to 2022 to pay personal bills and expenses.
As a result of these actions, and a range of other breaches of the Superannuation Industry (Supervision) Act, the ATO disqualified both from acting as a trustee of a super fund and imposed a remitted administrative penalty of $9864, leading Alicer and Ramos to seek a review of those decisions before the ART.
The published recording of the hearing stated Alicer had told the ATO that following a relationship breakdown in which Ramos moved out of the family home in mid-2017, she used the SMSF monies to renovate the house to enable her to take in boarders and generate an income, and had always intended to repay the loans and finally did so in 2024 after selling a property jointly owned with a sister.
“The applicant [Alicer and Ramos] does not dispute the contraventions said to have been committed in the relevant years. They say, however, the decision to disqualify was excessive and disproportionate having regard to their inexperience and ignorance, extenuating circumstances underpinning the conduct, the remedial action taken, their prompt and truthful disclosures and willingness to undertake further study and education,” the record of the decision stated.
Conversely, the ART noted the ATO’s rejection of the repayment of the loan, and lack of knowledge, as reasons for overturning its disqualification decision.
“The respondent [the ATO] contended that the statutory preconditions having been met, disqualification was the correct and preferable decision because the number, nature and seriousness of the contraventions speak to the applicants’ risk to future compliance, particularly due to the inference that the applicants knowingly and repeatedly diminished the SMSF’s retirement benefits for a personal, present-day gain,” the ATO said.
“The restoration of funds to those accounts does not remediate concern that the applicants are likely to commit the same contravention in the future.”
In agreeing with the regulator, the ART did not see the repayment as grounds to overturn the disqualifications or penalty decision.
“The applicants submit the fund has now been fully restored and is in a stronger financial position than ever. While repayment is relevant, that submission must be approached with caution,” ART general member Raymond Smith said.
“The present financial position of the fund is only known with the benefit of hindsight. At the time of the withdrawals, there was no certainty as to when, or if, the monies would be restored.
“A contravention does not lose its seriousness because subsequent events proved favourable.”
