Federal Court acts against SMSF trustee over family business dealings
The Federal Court has ordered the trustee of a husband-and-wife SMSF to pay a $32,500 penalty plus costs for contravening some of the most basic superannuation laws in an effort to rescue the couple's small business. (Deputy Commissioner of Taxation (Superannuation) versus Anthony Shaune Lyons.)
The court was told that the trustee of the self-managed fund arranged for the fund to make six “back-to-back” loans totally $190,000 to his brother-in-law who then transferred the money into the account of the couple’s convenience store for use as working capital. At the time of the loans, the store was experiencing financially difficulties.
These loans accounted for all but $3000 of the fund's assets; none of the money has been repaid. The judgment described the loans as “irrecoverable”.
The trustee contravened the:
- Sole-purpose test – there is not more fundamental provision in superannuation law. (The Superannuation Industry (Supervision) Act states that a superannuation fund must be maintained for the purpose of providing retirement benefits.)
- Prohibition on providing financial assistance to fund members and relatives.
- In-house asset rule. Superannuation funds must not make loans or have investments with related parties that exceed five per cent of the fund’s assets.
- Requirement that superannuation funds must conduct transactions on an arm’s length basis.
If you want to discuss this case, please contact Peter Bobbin, Managing Principal of Argyle Lawyers.
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