The Tax Office has issued an SMSF News Alert reminding trustees of their obligations if they become a “disqualified person” under s 120 of the SIS Act. The Tax Office notes that if a trustee of an SMSF (or a director of the corporate trustee of an SMSF) becomes a “disqualified person”, the person is not allowed to remain a trustee/director. A disqualified person commits an offence if they know they are disqualified and continue to be, or act as, a trustee of an SMSF. The Commissioner warns that penalties, including fines and imprisonment up to 2 years, can apply. In addition, there is a risk that the SMSF could be made a non-complying fund if the trustees do not take appropriate action.
The Tax Office notes that a person can become a disqualified person for a number of reasons, most commonly when they are considered to be insolvent, under administration or an undischarged bankrupt.
If a trustee becomes a disqualified person the Tax Office says that they need to remove themself as trustee and inform the Tax Office immediately. It is also necessary to transfer the trustee’s superannuation interest out of the SMSF. If this results in the fund no longer meeting the definition of an SMSF, the Tax Office says the fund may need to be restructured to meet the requirements of a regulated super fund or be wound up. The other trustees must also ensure that the disqualified person is not, and does not act as, a trustee if they know the person is disqualified.
For further information, the Tax Office referred to its previously released publication, Disqualified persons and self-managed superannuation funds.
[LTN 209, 29/10/13]