19 Feb Rising numbers of trustees disqualified and recognised as not being ‘fit and proper’
As stated in the Commissioner of Taxations’ annual report; there was a significant increase in SMSF trustees being disqualified of their status.
The grounds for disqualification include:
For individual trustees
- Previous conviction of an offence involving dishonest
- Being subject to a civil penalty order
- Are insolvent under administration (or undischarged bankrupt)
- Otherwise been disqualified by the commissioner, court or regulator
For corporate trustees
- If an officeholder is disqualified
- Where an administrator, provisional liquidator or receiver has been appointed to the company
- Or the company is being wound up
Once disqualified, the individual or entity is then listed as being ‘Disqualified for not being Fit and Proper’.
Though the ATO Practice Statement (Law Administration) states:
‘Disqualification is not a punishment, penalty or sanction to the individual. It is used where the Commissioner is concerned about the compliance attitude of an individual and/or their suitability to act as trustee.’
Trustees whom have been disqualified must notify the ATO immediately to avoid being penalised. The penalty for not doing so is $8,500 and further, where the trustee fails to cease acting as trustee/director, criminal and civil penalties of up to 2 years in prison or a $10,200 penalty can apply.
The ATO’s compliance approach is strict and unforgiving. It is highly important that trustees are aware of their responsibilities and the implications one they are deemed disqualified.