I read an interesting article recently by DBA Lawyers of Melbourne who placed a different slant on an issue with SMSF’s and the important Rule that says ‘certain persons are disqualified from acting as Trustees’.
The SISA Act provides that a person who has been convicted of an offence involving dishonest conduct is prohibited from taking on a role of Trustee or continuing in such role. It is important to remember that to be a member of a SMSF, one also has to be a Trustee. So if you are prohibited from being a Trustee, you are also unable to be a member.
Taking this one step further, if you are a member and trustee and you are then convicted of an offence involving dishonest conduct, you cannot remain as a trustee and you cannot remain a member!
So, you are thinking, well that’s OK, I am honest so I have nothing to worry about! Perhaps consider this scenario: Assume a person was caught at Flinders Train Station or on a Melbourne tram without a ticket after taking a ride. If it could be shown that their intention was to ride on the train/tram without a ticket, then maybe this would constitute dishonest conduct and if convicted, they could not become or remain a member of a SMSF!
Now, taking this one step further, let us assume we had just completed an important estate plan that entailed that same person taking an important role in their parent’s estate plan by becoming a Trustee and member of the family SMSF. Potentially this would be ‘defeated’ by an act of foolishness – maybe on the spur of the moment!
Fortunately there is some limited scope to waive the disqualified person status – with an application to the ATO or the Federal Court a possibility â€” but this would only apply to minor offences.
The risk is – a breach of these provisions imposes severe financial penalties as well as possible jail time!
What is even more interesting is that there is no restriction on a murderer being a Trustee! So a person who rides a tram without paying might be precluded from being a member of a SMSF, but not a murderer!!!
The lesson? Firstly, buy a ticket every time you travel! Secondly, if you are currently a member of a SMSF and some time in your dark and distant past you have been so convicted (maybe you stole something in your miss-spent youth) then you are facing important issues that we will need to work together confidentially to resolve.
Something to think about and guide your children on perhaps?
Liability limited by a scheme approved under Professional Standards Legislation