The Trustees of some self-managed superannuation funds display a blatant disregard for member’s retirement savings and for superannuation law.
Consider the fund that ‘invested’ 95% of its assets in a member’s failing business venture and its Trustees refused to cooperate with a proposal by the regulator for the repayment of the money.
Or, another self-managed fund that leased a residential property to its members in breach of a provision in superannuation law that a fund’s assets must be used solely for the purpose of providing for retirement of members. This fund aggravated the position by not charging rent.
A third fund leased plant and equipment to a member’s business and allowed the member to use the assets for his personal use after the enterprise collapsed. This fund also permitted a member to hang fund-owned artwork in his home.
These are just three cases from a list compiled by the Tax Office in its role as regulator of Australia’s 321,000 plus self-managed funds.
Serious breaches of superannuation law will result in a fund being classified as non-complying. However, rather than declare that a fund is non-complying, the Tax Office prefers to use such enforcement measures as gaining undertakings from Trustees, freezing fund assets, suspending or removing Trustees, and seeking civil or criminal penalties through the courts.
The assets of a fund that is non-complying are taxed at the top marginal rate, and members can be personally taxed at their marginal rates on money illegally taken from a fund.
As the Tax Office’s focus is on compliance by established funds, ASIC continues its campaign to discourage those with little capital from establishing self-managed funds. They are policing the quality of financial planning advice and pursuing the promoters of schemes that encourage fund members to illegally withdraw their preserved superannuation savings before retirement.
Source: In The Black September 2006 (CPA Australia)