The AAT has confirmed that the applicant, the trustee and member of an SMSF, was in breach of the payment standards prescribed under s 31(1) of the Superannuation Industry (Supervision) Act 1993 by making a payment of $20,000 to himself without satisfying the “retirement” condition of release. The AAT ruled that it was not appropriate for the Commissioner to exercise his discretion in s 304-10(4) of the ITAA 1997 to tax the amount at concessional rates for a range of reasons, including the following:
no penalty was imposed on the applicant and the Commissioner exercised his discretion to allow the SMSF to maintain its complying status, despite the breach;
the superannuation benefit did not arise in circumstances beyond the “effective control” of the applicant as he was the trustee of the SMSF and was in a position to control the nature and timing of any superannuation benefit paid to him;
as a trustee of the SMSF, the applicant should have been aware that “retirement” was a “condition of release”; and
the Auditor’s report expressed the opinion that there had been a payment of benefits that had not complied with the “conditions of release” and there was no evidence that during this period the applicant in his capacity as a trustee of the SMSF took any action to rectify the contraventions.
In short, the AAT concluded that having regard to the history of s 304-10, the legislative context in which it was enacted, the nature of the a SMSF and the applicant’s particular circumstances, then the applicant had not discharged the onus of proving that it was “unreasonable” to include the $20,000 superannuation benefit which was paid to him by his SMSF in his assessable income for the relevant year, and was to be taxed at marginal rates. (AAT Case [2012] AATA 133, Re Mason and FCT, AAT, Ref No 2011/3905, Walsh SM, 24 February 2012.)
[LTN 43, 5/3]
SECTION 304-10 Superannuation benefits in breach of legislative requirements etc.
304-10(1) Include in your assessable income the amount of a *superannuation benefit if:
(a) any of the following applies:
(i) you received the benefit from a *complying superannuation fund or from a *superannuation fund that was previously a complying superannuation fund;
(ii) the benefit is attributable to the assets of a complying superannuation fund or from a superannuation fund that was previously a complying superannuation fund; and
(b) any of the following applies:
(i) the fund was not (when you received the benefit) maintained as required by section 62 of the Superannuation Industry (Supervision) Act 1993;
(ii) you received the benefit otherwise than in accordance with payment standards prescribed under subsection 31(1) of the Superannuation Industry (Supervision) Act 1993.
304-10(2) Include in your assessable income the amount of a *superannuation benefit if:
(a) any of the following applies:
(i) you received the benefit from a *complying approved deposit fund or from an *approved deposit fund that was previously a complying approved deposit fund;
(ii) the benefit is attributable to the assets of a complying approved deposit fund or from an approved deposit fund that was previously a complying approved deposit fund; and
(b) you received the benefit otherwise than in accordance with payment standards prescribed under subsection 32(1) of the Superannuation Industry (Supervision) Act 1993.
304-10(3) Include in your assessable income the amount of a *superannuation benefit you receive from an *RSA in breach of the Retirement Savings Accounts Act 1997, regulations under that Act or payment standards prescribed under subsection 38(2) of that Act.
304-10(4) However, you do not have to include the amount in your assessable income to the extent that the Commissioner is satisfied that it is unreasonable that it be included having regard to:
(a) for subsection (1) or (2) – the nature of the fund; and
(b) any other matters that the Commissioner considers relevant.