A Disqualified Person – How a person’s legal history impacts eligibility to be a SMSF trustee

A disqualified person cannot be a trustee for a self-managed super fund (SMSF), nor can they appoint an enduring power of attorney to act for them as a trustee in order to get around their personal disqualified status, reminds Peter Townsend, principal of Townsends Business & Corporate Lawyers.

Indeed the question, according to Townsend, is whether “youthful indiscretions” can actually disqualify someone from being an SMSF trustee.

“So, you want to establish an SMSF but had some youthful indiscretions where charges were proven but no conviction was recorded,” he said. “Where does that leave your plan for an SMSF?”

“Can you become a trustee or will you be seen as a disqualified person by the ATO which regulates SMSF?”

According to Townsend, the Superannuation Industry (Supervision) Act provides that a person is disqualified:

• if ‘they have been convicted of an offence in respect of dishonest conduct;
• if a civil penalty order has been made in relation to that person; they are an insolvent under administration; or
• if they have been disqualified by the Commission of Taxation for the Australian Taxation Office (ATO).

As to whether a conviction was necessary for a prospective trustee to be disqualified, Townsend added that the person in question had to have been charged with an offence involving dishonest conduct.

“That charge must also be proven against them regardless of whether a conviction is actually recorded or not,” he said. “So what can you do after if this is the case?”

“Ask your client to get copies of the court documents and make enquiries as to whether the charge was proven and what the penalty requirements were for that charge,” Townsend outlined.

“Your client should contact the lawyer who assisted them with their defence or the court where the matter was heard for assistance in answering these questions.”

Unfortunately, Townsend said that if the charge was proven and the penalty requirements for that charge were two years or more or a fine involving 120 penalty units or more, this was considered to be an offence involving ‘serious dishonest conduct.’ An SMSF was therefore no longer an option.

“However, if the charge was not proven or had penalties less than these penalty requirements, you can apply to the ATO for a waiver of being a ‘disqualified person’,” Townsend said.

“The ATO must make a decision within 60 days of receiving the application.”

Via www.moneymanagement.com.au

By Damon Taylor