Brooks and Commissioner of Taxation (Taxation)

Brooks and Commissioner of Taxation (Taxation) [2019] AATA 1236 (5 June 2019)
Division:TAXATION AND COMMERCIAL DIVISION
File Numbers: 2018/1059 and 2018/4384
Re:Troy Brooks
APPLICANT

AndCommissioner of Taxation
RESPONDENT

DECISION
Tribunal:Senior Member Dr M Evans
Date:5 June 2019
Place:Perth

The Tribunal extends the time for the lodgement of the Applicant’s application for review of the Reviewable Decision dated 10 January 2018 to 6 March 2018.
The Reviewable Decision made under s 126A of the Superannuation Industry (Supervision) Act 1993 (Cth) dated 10 January 2018 (First Reviewable Decision) is affirmed.
The Reviewable Decision dated 18 June 2018 (Second Reviewable Decision) is affirmed.
................[sgd].................................
Senior Member Dr M Evans
Catchwords
SUPERANNUATION – self-managed superannuation fund – decision to disqualify Applicant as trustee of self-managed superannuation fund – nature, seriousness and number of contraventions – whether Applicant fit and proper person to be a trustee – loan to related party – no formal loan agreement or other documentation of loan – whether a commercial loan or payment of member benefit – application for review lodged outside of 28 day period – extension of time by consent – reviewable decision affirmed
INCOME TAXATION – decision not to reduce shortfall interest charges – whether withdrawal of funds from self-managed superannuation fund a loan or assessable income – no loan agreement – moneys withdrawn from self-managed superannuation fund used to purchase investment property – no interest repaid – reviewable decision affirmed
Legislation
Administrative Appeals Tribunal Act 1975 (Cth), s 29(2), s 29(7)
Income Tax Assessment Act 1997
(Cth), s 304-10, s 304.10(1)(a)(i), s 304.10(1)(a)(ii),
s 304.10(1)(b)(i), s 304.10(1)(b)(ii)

Superannuation Industry (Supervision) Act 1993 (Cth)
, s 10, s 19, s 31(1), s 34(1),
s 34(2), s 35B(2), s 35D, s 62, s 65, s 65(1), s 65(1)(b), s 71(1), s 82, s 83, s 84, s 109,
s 109(1), s126A, s 126A(2), s 126A(2)(a), s 126A(2)(b), 126A(3), s 262A

Superannuation Industry (Supervision) Regulations 1994 (Cth), r 6.17(2), r 6.18(1), Schedule 1
Taxation Administration Act 1953 (Cth), s 14ZZF, s 14ZZK, s 14ZZK(b)(i)
Cases
Preuss and Australian Prudential Regulation Authority [2005] AATA 748
Secondary Materials
Guideline on Disclosure and Non-Disclosure of Personal Information in the AAT, paragraph [9]
REASONS FOR DECISION
Senior Member Dr M Evans
5 June 2019
THE APPLICATION

The Applicant is seeking a review of two decisions of the Commissioner.
The first is a decision dated 10 January 2018 (T2), made under section 126A of the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act) to disqualify him from being a trustee of a self-managed superannuation fund (First Reviewable Decision).
The second decision is a notice of objection decision dated 18 June 2018 (ST2) which maintained a decision not to reduce shortfall interest charges for the financial year ending 30 June 2015, but remitting a portion of the shortfall interest charge (Second Reviewable Decision).
FACTUAL BACKGROUND
The facts are substantially agreed by the parties (see Statements of Facts, Issues and Contentions of the parties in Exhibit A1 and Exhibit R3 respectively). Consequently, and for ease of reference, the Tribunal has used a similar structure in this factual background section to that adopted in the Statements of Facts, Issues and Contentions of the parties.
At all relevant times until approximately May 2012, the Applicant’s spouse was Ms A. Ms A’s name has been omitted because her identity is not relevant to the Tribunal’s findings or the cogency of these reasons (see Guideline on Disclosure and Non-Disclosure of Personal Information in the AAT, paragraph [9]).
The Applicant and Ms A separated in 2011, and divorced in late 2012 (T73).
The self-managed superannuation fund
A Trust Deed dated 3 February 2011 established a self-managed superannuation fund (the Fund), as defined in s 17A of the SIS Act (T1, page 25, clause 1 of Trust Deed).
At all material times the:
(a)Applicant was a member of the Fund (T5);
(b)A company was the Trustee of the Fund (T4, page 63, Schedule 1 of Trust Deed) (the Corporate Trustee);
(c)Applicant was a director and a shareholder of the Corporate Trustee.
Ms A was a member of the Fund from approximately 12 February 2011 (T5, page 98) until approximately 28 November 2014 (T66, page 408).
In separate Trustee Consent Forms, both dated 12 February 2011, the Applicant and

Ms A became responsible officers in their capacities as directors of the Corporate Trustee (T8).
Ms A was a director and a shareholder of the Corporate Trustee until 15 January 2015 (T65, page 393).
On 19 February 2011, the Fund was registered with the Australian Taxation Office (ATO) (T61).
Provisions of the Trust Deed that are relevant to this application include the following:
(a)Clause 4 which provided that the sole or primary purpose of the Fund was for the provision of old age pensions (T4, page 25); and
(b)Clause 129 which provided that the Corporate Trustee could pay a benefit to a member when the member has reached his or her preservation age and retired from gainful employment, or when the member has satisfied a condition of release as prescribed in superannuation law (T4, page 50).
Withdrawals from the Fund in the financial years ending 30 June 2011 to 30 June 2013
On 6 June 2011, $200,000 was withdrawn from the Fund (T13, page 165) and deposited into the personal bank account of the Applicant and Ms A (T31, page 261, clause 1.1).
This withdrawal was recorded in the financial statements of the Fund as being a loan to the Applicant and Ms A (T9, page 119).
The Applicant and Ms A used this money to purchase a farm property (the Investment Property) in their personal names, to undertake renovations on the Property and to finance a margin lending account (T31, page 261, clause 1.1).
On 4 August 2011, $17,000 was withdrawn from the Fund (T13, page 167), and on

24 November 2011, $40,000 was withdrawn from the Fund (T13, page 170).
The Fund’s general ledger for the period 3 February 2011 to 30 June 2014 (T14, page 179) recorded that as at 30 June 2012 $796 was withdrawn from the Fund.
This general ledger for the period 3 February 2011 to 30 June 2014 showed the total debits from the fund to be $257,796 (T14, page 179). The financial statements and reports for the Fund as at 30 June 2012 also recorded the amount of $257,796 as a loan to the Applicant and Ms A (T10, page 132).
The financial statements and reports for the Fund at 30 June 2013 recorded the amount of $257,796 as a loan to the Applicant and Ms A (T12, page 161).
The closing balance of the Fund as at 30 June 2013 was $11.55 (T13, page 175).
Consent orders made by the Family court
In approximately October 2014, the Family Court made consent orders with respect to the Applicant and Ms A (Consent Orders) (T32, pages 264-271).
The Consent Orders relevant to the Investment Property and the Fund were summarised in the Respondent’s Statement of Facts, Issues and Contentions (Exhibit R3, paragraph [21] – see also Exhibit A1, paragraph [21] which adopted this wording) as follows:
21.1. the Applicant and Ms [A] were to pay in equal shares all taxes, penalties, fines, interest and other charges in connection with the regularisation of the affairs of the Fund which have arisen during any period in which they were both directors of the Corporate Trustee and members of the Fund;
21.2. Ms [A] was to forthwith pay into the Fund by way of a loan repayment such sums as her financial advisers advised, and that the Applicant and Ms [A] were to sign all documents to ensure that Ms [A]’s payment was allocated to Ms [A]’s membership account in the Fund;
21.3. upon Ms [A] repaying the loan, the Applicant and Ms [A] were to sign documents and do all things necessary to rollover Ms [A]’s membership entitlements into a superannuation fund of her choice;
21.4. upon Ms [A] rolling over her entitlements into a superannuation fund of her choice, she was to resign as director of the Corporate Trustee and resign as a member of the Fund, with her rights, title and interest in the Corporate Trustee and the Fund to be transferred to the Applicant;
21.5. the Applicant was to become the sole owner of [the Investment Property] and all the farm equipment and chattels located on it;
21.6. within 30 days of the transfer of [the Investment Property] to the Applicant or within 48 hours of the settlement of the sale of [the Investment Property], the Applicant was to pay into the Fund by way of a loan repayment such sums as his financial advisers advised.
(Footnotes omitted.)
The Applicant is currently the sole registered proprietor of the Investment Property.
The parties disagree about the value of the Investment Property.
In the Respondent’s Statement of Facts Issues and Contentions, the Respondent notes that in February 2015 the Investment Property was valued between $625,000 to $650,000 (Exhibit R3, paragraph [22], T25, page 252), as at February 2015.
The Applicant submitted that he had obtained a value of the Investment Property from a local real estate agent, although it is unclear when, and that the value was $525,000 to $550,000 (Exhibit A1, paragraph [22]).
Audits for financial year ending 30 June 2012 and 30 June 2013 and payments in 2014
An auditor’s report for the Fund for the financial year ending 30 June 2012 (T18, page 196) dated 17 November 2014 stated that s 65 of the SIS Act had been breached due to a loan being made to members to the value of $257,796.
The auditor’s report stated that the members (that is, the Applicant and Ms A) had verbally agreed to rectify the breach by paying back the loan in full by 28 February 2015
(T18, page 196).
An auditor’s report for the Fund for the financial year ending 30 June 2013 (T18, page 188), also dated 17 November 2014, stated that s 65 of the SIS Act had been breached due to a loan being made to members to the value of $257,796 and that the members aimed to rectify the breach by paying back the loan in full (T18, pages 188-189).
In a voluntary disclosure of non-compliance sent to the ATO by the Applicant’s accountant dated 17 November 2014 it was proposed that the contravention would be rectified by the Applicant transferring the Investment Property to the Fund with interest, and Ms A
re-paying the other half of the loan with interest (T19 and T20).
As at 31 August 2014, the balance of the loan with interest was $308,764.33 (T27, page 255).
On 26 November 2014, Ms A paid $4,001.62 to the ATO. These moneys were credited to the Fund’s income tax account (T33, page 274; T30, page 258).
On 28 November 2014, Ms A deposited $150,830.54 into the Fund’s bank account (T24, page 244). On the same date, Ms A rolled over this sum from the Fund to another superannuation fund (T24, page 244; Exhibit R3, paragraph [28]).
Audits for financial years ending 30 June 2014 through to 30 June 2016 and payments in 2015
An auditor’s report for the Fund for the financial year ending 30 June 2014 (T38, pages 280-282) dated 29 May 2015 found that s 65 of the SIS Act had been breached to the value of $257,796.
The Applicant’s half share of this loan was $128,898.
An auditor’s report for the Fund for the financial year ending 30 June 2015 dated
24 May 2016 again found that s 65 of the SIS Act had been breached to the value of $122,298 (T44, page 317).
An auditor’s report for the Fund for the financial year ending 30 June 2016 dated

8 June 2017 again found that s 65 of the SIS Act had been breached to the value of $122,298 (T59, page 364).
The Respondent inferred in its Statement of Facts, Issues and Contentions that due to the difference between the Applicant’s half share of $128,898 and the amounts of $122,298 in the 2015 and 2016 auditor’s reports that at some time in the financial year ending
30 June 2015, the Applicant paid the sum of $6,600 into the Fund (Exhibit R3, paragraph [33]). At the Tribunal hearing the Applicant stated that he paid this amount into the Fund to try to rectify the contravention by building up the amount of money in the Fund (transcript, pages 27-28).
Enforceable undertaking
On 18 March 2015, the Applicant and Ms A as the Corporate Trustee signed an enforceable undertaking (T31), made under s 262A of the SIS Act. This enforceable undertaking was accepted by the ATO as being effective from 15 April 2015
(T36, page 277).
In this enforceable undertaking, the Applicant and Ms A agreed to equally repay the loan of $257,796 to the Fund with interest (T31, clause 2.1). The enforceable undertaking noted that Ms A had already repaid her 50% share of the loan with interest (T31, clause 2.2).
The enforceable undertaking further noted that the Applicant intended to repay his 50% share of the loan with interest by transferring his equity in the Investment Property to the Fund. It was further noted that the transaction would not be finalised until after
30 June 2015 because the Applicant was obtaining the money through a limited recourse borrowing arrangement (T31, clause 2.2).
On 13 August 2015, the Applicant as the Corporate Trustee signed an amended enforceable undertaking in similar terms, with the difference being that the transaction would not be completed by the Applicant until “late 2015 or early 2016” (T40, clause 2.2). However, this amended enforceable undertaking was never accepted by the Respondent (Exhibit R3, paragraph [38]).
The Applicant’s income taxation return for the financial year ending 30 June 2015
On 10 December 2015, the Applicant lodged his individual income taxation return for the financial year ending 30 June 2015 (ST3, page 12).
The Respondent issued a Notice of Assessment for the year ending 30 June 2015 on
18 December 2015 which assessed his taxable income as $47,436, with $4,121.35 tax payable (ST4, page 18).
Recording of the loan in the Fund’s returns
The Respondent provided the following Table in Exhibit R3, paragraph [41], which relevantly summarises the recording of the loan in the Tax Returns lodged for the Fund for each of the financial years ending 30 June 2011 through to 30 June 2016:

Financial year

Tax
return
due

Date of
lodged
return

Amount of recorded loan

Total assets of the Fund reported

Loan as a percentage of assets

_

To whom the loan was made

2011

28 February 2012

29 August 2012

$200,000

$205,176

97.94%

The Applicant and Ms A

2012

5 June 2013

25 November 2014

$257,796

$257,808

99.99%

The Applicant and Ms A

2013

31 October 2013

25 November 2014

$257, 796

$257,808

99.99%

The Applicant and Ms A

2014

31October 2014

10 June 2015

$257,796

$257,808

99.99%

The Applicant and Ms A

2015

14 June 2016

26 May 2016

$122,298

$122,697

99.67%

The Applicant

2016

30 June 2017

15 June 2017

$122,298

$162,395

75.31%

The Applicant

In the Fund’s income taxation return for the year ending 30 June 2011, lodged with the ATO on 29 August 2012, the Corporate Trustee answered “no” to the following questions (T11, pages 145-146):
(a)“Did the [Fund] loan, lease to or invest in related parties?”
(b)“Did the [Fund] hold in-house assets at any time during the year that exceeded 5% of total assets?”
(c)“Did the [Fund] lend money or provide financial assistance to a member, relative of a member of the Fund?”
(d)“Did members have the personal use of the [Fund’s] assets before retirement?”
In the Fund’s income taxation return for the year ending 30 June 2012, lodged with the ATO on 25 November 2014, the Corporate Trustee answered “no” to the same questions (T21, pages 220-221).
Disqualification and Shortfall Decisions
In a letter dated 2 November 2017 the Deputy Commissioner of Taxation advised the Applicant that:
(a)he had been disqualified under s 126A of the SIS Act. The effect of the disqualification was as follows (T66, page 396):
You must immediately:
·     stop being, or acting as, a trustee, or a responsible officer of a corporate Trustee, of all superannuation entities including [name omitted] Super Fund,
·     stop being, or acting, as an investment manager or custodian, or a responsible officer of a body corporate that is an investment manager or custodian of a superannuation entity, including [name omitted] Super Fund,
·     not start in any of these roles whilst you are a disqualified person.
This will be referred to as the First Decision.
(b)
as a result of an audit of his individual tax return for the financial year ended

30 June 2015, the Applicant’s taxable income was identified to be incorrect and was increased by $122,298, with a total shortfall amount of $47,054.90 for the 2015 financial year (T66, page 397). The reason for the amendment was “to include benefits accessed from the Fund [that is, the $122,298] without meeting a condition of release”.
This will be referred to as the Second Decision.
(c)
A shortfall interest charge was also applied to the shortfall amount from the due date of the original assessment to the day before the amended assessment

(T66, page 397).
Amended notice of assessment for the financial year ending 30 June 2015
On 14 November 2017, the Respondent issued a notice of amended assessment for the income taxation year ending 30 June 2015 (ST5, page 22) which increased the Applicant’s taxable income from $47,436 to $170,734 to include the benefit of $122,298 that he accessed from the Fund.
Under the notice of amended Assessment for the income taxation year ending
30 June 2015, the tax payable by the Applicant was $50,656.58 which was comprised of $47,054.90 in additional tax liability as a result of the superannuation benefits received, plus shortfall interest charges of $3,513.85 (ST5, page 22; T66, page 405).
Objection and Review of the First (Disqualification) Decision
In a letter to the ATO dated 22 November 2017, the Applicant requested a review of the decision of 2 November 2017 (T67).
In an email to the ATO dated 22 December 2017, the Applicant provided “further supporting documentation” which he described as a “loan agreement that was written in 2011 for the purpose of the [investment property] loan transaction” (T72, page 432).
Specifically, the “Loan Agreement” was between Savage Electrics Pty Ltd (Savage Electrics) and the Applicant. It was undated, unsigned and was incomplete. For example, it did not refer to the amount of loan or the interest rate (T73, page 441-442).
On 10 January 2018, the Respondent confirmed the decision of 2 November 2017 to disqualify the Applicant as the trustee of a self-managed superannuation fund

(T2, pages 7-8). This is the First Reviewable Decision.
The Applicant lodged an application for a review of this decision, being the First Decision, in the Tribunal on 6 March 2018 (T1).
Objection and Review of the Second (Shortfall) Decision
In a letter dated 20 May 2018 (ST6) the Applicant objected to the Second Decision regarding his revised 2015 Income Taxation assessment.
On 18 June 2018, the Respondent disallowed the Applicant’s objection, but decided to remit a portion of the shortfall interest charge ($472.95) (ST2). This is the Second Reviewable Decision.
The Applicant lodged an application for a review of this decision, being the Second Decision, in the Tribunal on 6 August 2018 (ST1).
ISSUES
The issues with respect to the First Reviewable Decision which require determination by this Tribunal were summarised by the Respondent in Exhibit R3, at paragraphs [54]-[57], as follows:
54. If the Applicant were to file and serve a written application for an extension of time in which to seek review of the First [Reviewable] Decision, having filed his application for review in respect of the First [Reviewable] Decision on 6 March 2018, when the Respondent’s decision was taken to have been made on 10 January 2018, is it reasonable in all the circumstances for the Applicant be granted an extension of time in which to seek review of the First [Reviewable] Decision?
55. If a written application were made by the Applicant as to the first issue, the Respondent would consent to the Applicant being granted an extension of time in which to seek review of the First [Reviewable] Decision.
56. Is the correct and preferable decision that the Applicant be disqualified under section 126A(2) from acting as a trustee or a responsible officer of a superannuation entity? In particular:
56.1. Did the Corporate Trustee contravene the SIS Act?
56.2. Was the Applicant the responsible officer at the time of the Corporate Trustee’s contraventions of the SIS Act?
56.3. Do the nature, seriousness or number of the contraventions provide grounds for the Applicant’s disqualification?
57. Is the correct and preferable decision that the Applicant be disqualified under section 126A(3) on the ground that he was not a fit and proper person to be a trustee or a responsible officer of a body corporate that is a trustee?

The issues relevant to the Second Reviewable Decision which require determination by this Tribunal were also summarised by the Respondent in Exhibit R3, at paragraph [58] as follows:
58. Has the Applicant proved:
58.1. on the grounds stated in the taxation objection that the Respondent’s decision to assess the money paid to him from the Fund in FY 2015 was excessive or otherwise incorrect; and
58.2. what the assessment should be?
The Tribunal agrees with the above formulation of the issues by the Respondent.
EXTENSION OF TIME FOR THE FIRST REVIEWABLE DECISION
The Applicant lodged his application for review of the First Reviewable Decision (dated 10 January 2018) on 6 March 2018. Consequently, he exceeded the prescribed 28 day time limit for making an application to the Tribunal (s 29(2) of the AAT Act).
The Respondent submitted that it would consent to an extension of time for the review of the First Reviewable Decision if the Applicant submitted a written extension of time request to the Tribunal (Exhibit R3, paragraph [55]). The Tribunal made a direction granting leave to the Applicant to do so, and the Applicant lodged a written request to extend the time with the Tribunal on 21 February 2019.
The Tribunal notes that the First Reviewable Decision (dated 10 January 2018) incorrectly stated under the heading, “If you disagree” that, “You have 60 days to apply to the Administrative Appeals Tribunal or Federal Court for a review of our decision” (T2, page 7; Original emphasis). Given that the Applicant was provided with an incorrect statement about the prescribed time for lodging an application for review, and as the Respondent has consented to the extension of time, the Tribunal has decided to exercise discretion to extend the time for the Applicant to lodge his application for review pursuant to s 29(7) of the AAT Act.
MATERIAL BEFORE THE TRIBUNAL
The hearing of this application took place on 14 February 2019.
The Applicant was self-represented. Ms Young, instructed by Mr Chua from Minter Ellison Lawyers, appeared for the Respondent.
The Applicant gave evidence, and also made submissions. No other witnesses were called.
At the hearing, the following documents were put into evidence:
(a)
the Applicant’s Statement of Facts, Issues and Contentions dated

9 November 2018 (Exhibit A1);
(b)two cash management account statements for the Corporate Trustee company for the periods “31 December 2017 to 30 June 2018” and “30 June 2018 to
31 December 2018” respectively (Exhibit A2), handed up by the Applicant at the hearing;
(c)bundle of three documents handed up by the Applicant at the hearing, comprising a:
(i)property loan statement for the period 20 September 2018 to 2 October 2018;
(ii)rates and valuation notice for the rating year 1 July 2017 to 30 June 2018; and
(iii)printout from the ATO portal showing balances of the Applicant’s superannuation accounts (Exhibit A3);
(d)two volumes of T documents (s 37 documents, as modified by s 14ZZF of the Taxation Administration Act 1953 (Cth)). Volume 1 is numbered T1 to T40, and volume 2 is numbered T41 to T73 (Exhibit R1);
(e)supplementary T documents (s 37 documents, as modified by s 14ZZF of the Taxation Administration Act 1953 (Cth) numbered ST1 to ST11 (Exhibit R2);
(f)Respondent’s Statement of Facts, Issues and Contentions dated 12 October 2018 (Exhibit R3).
When considering the issues before the Tribunal, the Tribunal has had regard to all of the written and oral submissions and material before it. The Tribunal is satisfied that the parties were afforded an adequate opportunity to be heard and to make submissions.
FIRST REVIEWABLE DECISION: SHOULD THE APPLICANT BE DISQUALIFIED FROM ACTING AS A TRUSTEE OR RESPONSIBLE OFFICER OF A SUPERANNUATION ENTITY?
As noted above, the Applicant was disqualified under s 126A(2) of the SIS Act, which provides:
(2)The Regulator may disqualify an individual who is, or was, a responsible officer of a trustee, investment manager or custodian (the body corporate) if satisfied that:
(a)the body corporate has contravened this Act or the Financial Sector (Collection of Data) Act 2001 on one or more occasions; and
(b)at the time of one or more of the contraventions, the individual was a responsible officer of the body corporate; and
(c) in respect of the contravention or contraventions that occurred while the individual was a responsible officer of the body corporate--the nature or seriousness of it or them, or the number of them, provides grounds for the disqualification of the individual.
(Emphasis omitted.)
The Tribunal notes that the Applicant was the responsible officer of the Corporate Trustee from 12 February 2011 (T8), and that the alleged contraventions occurred from

6 June 2011 (when $200,000 was withdrawn from the Fund and transferred into the personal bank account of the Applicant and Ms A – see T13, page 165 and T31, page 261) until the end of the 2016 financial year. At all relevant times, the Applicant was a responsible officer of the Corporate Trustee.
The Respondent argued that, contrary to s 126A(2) of the SIS Act, the Applicant contravened the SIS Act on at least one, or more than one occasion (Exhibit R3, paragraph [60]), and that the contraventions are “sufficiently serious and numerous to warrant the Applicant’s disqualification under s 126A of the SIS Act” (Exhibit R3, paragraph [105]). The Tribunal will now go through the contraventions alleged by the Respondent before discussing whether the nature, seriousness or number, warrant disqualification.
Loan or financial assistance to members
The Respondent contends that the Applicant contravened s 65(1) of the SIS Act because the Corporate Trustee lent money to members of the Fund, namely the Applicant and

Ms A, from the 2011 financial year to approximately the 2015 financial year. In the alternative, the Respondent argues that the Corporate Trustee gave financial assistance to members of the Fund from the 2011 financial year to the present (Exhibit R3, paragraph [61]).
Section 65(1) of the SIS Act provides:
(1)A trustee or an investment manager of a regulated superannuation fund must not:
(a) lend money of the fund to:
(i) a member of the fund; or
(ii) a relative of a member of the fund; or
(b) give any other financial assistance using the resources of the fund to:
(i) a member of the fund; or
(ii) a relative of a member of the fund.
The evidence before the Tribunal shows that loans were made by the Corporate Trustee to the members in breach of s 65(1) of the SIS Act between 2011 and 2015.
Specifically, as noted above, on 6 June 2011, $200,000 was withdrawn from the Fund (T13, page 165) and deposited into the personal bank account of the Applicant and Ms A (T31, page 261, clause 1.1). This withdrawal was recorded in the Fund’s financial statements as being a loan (T9, page 119).
Additional amounts of $17,000 and $40,000 were withdrawn from the Fund on

4 August 2011 and 24 November 2011 respectively (T13, pages 167 and 170), as well as the $796 recorded in the Fund’s general ledger as at 30 June 2012 (T14, page 179). The income taxation returns of the Fund for the financial years 2011 through to and including 2016, as set out in the table reproduced in paragraph [46] above, noted these as loans to the Applicant and Ms A. Also, in the Consent Orders, the Family Court accepted that there was a loan to the Applicant and Ms A from the Fund (T32, pages 264-271).
However, despite the income taxation returns of the Fund recording a loan up to 2016, the Tribunal agrees with the Respondent’s contention that, when the Applicant made a payment of $6,600 into the Fund during the 2015 financial year, the money ceased to be a loan and became a member benefit (Exhibit R3, paragraph [63]). This was succinctly explained by Counsel for the Respondent at the Tribunal hearing who stated (transcript, page 11):
In this particular case it is the respondent’s contention that when it became clear that repayments were not going being made by Mr Brooks to the fund, then that’s essentially what changed the balance between this being a loan for a period of time to it being just a member benefit. And the evidence that is before the tribunal identifies what we have described as an inferred payment within the SIFC. That there appears to have been a payment of about $6,600 made by Mr Brooks or someone to the fund sometime in that financial year 2015, but thereafter there’s been no repayments. There’s been no objective proper written plan for steps to be made for the repayments, there’s no loan agreement for the outstanding balance, there’s no proper security for those monies, there’s no interest accruing on those monies to date.
So in the Commissioner’s submission, a point in time arose in financial year 2015 where we have changed that characteristic from being a loan to a member benefit, and therefore it falls within the assessable income.
The implication of this finding is that there was also a breach by the Applicant of s 65(1)(b) of the SIS Act from 2015 because the loan moneys became a member benefit and consequently the prohibition against giving, “other financial assistance using the resources of the Fund’ was also contravened by the Applicant who was the responsible officer of the Corporate Trustee at that time (T8).
Investment of more than 5% of the Fund’s Assets in related parties
The Respondent further contends that the Corporate Trustee, of which the Applicant was the responsible officer at the time, breached the in-house asset rules set in Part 8 of the SIS Act by lending money in amounts greater than 5% of the total assets to related parties, and not making any plan to reduce in-house assets below the 5% limit (Exhibit R3, paragraph [68]).
Section 71 of the SIS Act defines the basic meaning of an in-house asset to include:
(1)For the purposes of this Part, an in-house asset of a superannuation fund is an asset of the fund that is a loan to, or an investment in, a related party of the fund, an investment in a related trust of the fund, or an asset of the fund subject to a lease or lease arrangement between a trustee of the fund and a related party of the fund…
A “related party” is defined in s 10 of the SIS Act to include a member of the fund.
Section 84 of the SIS Act provides that a trustee of a regulated superannuation fund must comply with the in-house asset rules:
(1) Each trustee of a regulated superannuation fund must take all reasonable steps to ensure that the provisions of Division 2, and either Division 3 or 3A (whichever is applicable), are complied with.
Note:Section 166 imposes an administrative penalty for a contravention of subsection (1) in relation to a self managed superannuation fund.
(2)Subsection (1) is a civil penalty provision as defined by section 193, and Part 21 therefore provides for civil and criminal consequences of contravening, or of being involved in a contravention of, that subsection…
The Fund is a ‘regulated superannuation fund’ because it complies with s 19 of the SIS Act.
Section 83 of the SIS Act, which is in Division 3, provides:
(1)This section applies to a regulated superannuation fund.
(2)If the market value ratio of the fund's in-house assets exceeds 5%, a trustee of the fund must not acquire an in-house asset.
(3)If the market value ratio of the fund's in-house assets does not exceed 5%, a trustee of the fund must not acquire an in-house asset if the acquisition would result in the market value ratio of the fund's in-house assets exceeding 5%.
(4)For the avoidance of doubt, a reference in this section to acquiring an in-house asset includes a reference to making an investment or a loan, or entering into a lease or a lease arrangement, if the resulting loan or investment, or the asset subject to the lease or the lease arrangement, would be an in-house asset.
As noted by the Respondent in paragraph [73] of Exhibit R3, when read together, the above sections of the SIS Act prohibited the Corporate Trustee from investing more than 5% of the total assets of the Fund in related parties. The loans to Ms A and the Applicant who were related parties were well in excess of 5% of the total assets. More specifically, as identified in the Table in paragraph [46] above, from 2011 to 2015, the loans comprised between 97.94% and 99.99% of the total assets of the Fund. Consequently, the Tribunal finds that Part 8, and specifically s 83(2) of the SIS Act was breached.
The Respondent also contends that s 82 of the SIS Act was breached (Exhibit R3, paragraph [76]). Section 82 provides as follows:
(1)This section applies to a regulated superannuation fund.
(2)If the market value ratio of the fund's in-house assets as at the end of:
(a)the fund's 2000-2001 year of income; or
(b)a later year of income;
exceeds 5%, the trustee of the fund, or, if the fund has a group of individual trustees, the trustees of the fund, must prepare a written plan.
(3)The plan must specify the amount (the excess amount) worked out using the formula:
…
(4)The plan must set out the steps which the trustee proposes, or, if the fund has a group of individual trustees, the trustees propose, to take in order to ensure that:
(a)one or more of the fund's in-house assets held at the end of that year of income are disposed of during the next following year of income; and
(b)the value of the assets so disposed of is equal to or more than the excess amount.
(5) The plan must be prepared before the end of the next following year of income.
(6)Each trustee of the fund must ensure that the steps in the plan are carried out.
(Emphasis omitted)
Specifically, the Respondent’s submission was that s 82 of the SIS Act was breached because the Corporate Trustee did not prepare any written plan, or carry out any plan to reduce in-house assets below 5%. The Tribunal notes the Applicant’s evidence at the Tribunal hearing that there was no written plan in place to formulate a repayment structure to reduce the amounts owing to the Fund (transcript, page 34), nor is there any evidence before the Tribunal of any such plan being carried out. Consequently, the Tribunal also finds that there was a breach of s 82 of the SIS Act by the Corporate Trustee, of which the Applicant was, at the time of the contravention, the responsible officer.
Investments on arm’s length basis
Any investment made with the assets of a fund must be made on a commercial, arm’s length basis. The relevant section of the SIS Act is s 109(1) which provides:
(1)A trustee or investment manager of a superannuation entity must not invest in that capacity unless:
(a) the trustee or investment manager, as the case may be, and the other party to the relevant transaction are dealing with each other at arm's length in respect of the transaction; or
(b)both:
(i) the trustee or investment manager, as the case may be, and the other party to the relevant transaction are not dealing with each other at arm's length in respect of the transaction; and
(ii) the terms and conditions of the transaction are no more favourable to the other party than those which it is reasonable to expect would apply if the trustee or investment manager, as the case may be, were dealing with the other party at arm's length in the same circumstances.
The Respondent argued that s 109 of the SIS Act was breached because the loans made were wholly favourable to the members at the expense of the Fund and consequently were not made on an arm’s length basis. Almost 100% of the money in the Fund was transferred out of it, and yet the loans were unsecured, there was no time stipulated for payment and there was no written loan agreement to ensure that the moneys would be repaid (Exhibit R3, paragraph [79]). There was no interest paid to the Fund pursuant to the loans, and although the Applicant gave evidence that there was such an intention and that he attempted to make repayments with interest (transcript, page 13), there were no formal arrangements to ensure that interest was paid.
In his evidence at the Tribunal hearing, the Applicant referred to the unsigned and incomplete draft loan agreement with a third party, Savage Electrics, which he sent to the ATO on 22 December 2017 as proof of the loan (T72, page 432; T73, pages 441-442). However, in his explanation to the Tribunal, the Applicant conceded the document was part of an attempt to secure finance for approximately $120,000 to repay the Applicant’s portion of the loan, and that the loan never eventuated (transcript, pages 24-25). Hence, the draft loan document at T73 is not evidence of any written loan agreement with the Fund, but rather a subsequent attempt by the Applicant to obtain finance from a third party to repay his portion of the loan back into the Fund.
Based on the above discussion, the Tribunal finds that there was a breach of s 109 of the SIS Act because the loans from the Fund were not made on a commercial arm’s length basis.
Breach of operating standards
The Respondent also contends that the Applicant breached s 34(1) of the SIS Act by allowing a member’s benefit to be paid out of the Fund in breach of the operating standards prescribed under s 31 of the SIS Act.
Section 34(1) of the SIS Act provides:
Standards must be complied with
(1)Each trustee of a superannuation entity must ensure that the prescribed standards applicable to the operation of the entity are complied with at all times.
Note:Section 166 imposes an administrative penalty for a contravention of subsection (1) in relation to a self managed superannuation fund.
Offence
(2)A person who intentionally or recklessly contravenes subsection (1) commits an offence punishable on conviction by a fine not exceeding 100 penalty units.
Note:Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.
Section 31(1) of the SIS Act provides that: “The regulations may prescribe standards applicable to the operation of regulated superannuation funds (funds) and to trustees and RSE licensees of those funds.” (Original emphasis).
Subregulation 6.17(2) of the Superannuation Industry (Supervision) Regulations 1994 (Cth) (SIS Regulations) provides:
(2)A member's benefits in a fund:
(a)may be paid:
(i) by being cashed in accordance with Division 6.3; or
(ii) by being rolled over or transferred in accordance with Division 6.4, 6.5 or 6.7; or
(iii) by being allotted under Division 6.7; and
(b)must not be paid in that way except when, and to the extent that, the fund is required or permitted under this Part to pay them; and
(c)must be paid in that way when, and to the extent that, the fund is required under this Part to pay them.
In summary, sub-regulation 6.17(2) of the SIS Regulations provides that a member’s benefits in a fund must not be paid out of the fund unless it is in accordance with Division 6.3 of the SIS Regulations.
Sub-regulation 6.18(1) of the SIS Regulations in Division 6.3 provides that, “A member's preserved benefits in a regulated superannuation fund may be cashed on or after the satisfaction by the member of a condition of release.”
Schedule 1 of the SIS Regulations lists the various conditions of release which include retirement, death, terminal medical condition, permanent incapacity, severe financial hardship and the member attaining the age of 65 years.
As discussed above under the heading, “Loan or financial assistance to members”, specifically in paragraphs [79] and [80], the Tribunal has found that when the Applicant made a repayment of $6,600 into the Fund during the 2015 financial year, the money ceased to be a loan and became a member benefit.
The Respondent has submitted that none of the conditions of release specified in Schedule 1 of the SIS Regulations had been met at the time the money ceased to be a loan and became a member benefit. Consequently, the Corporate Trustee was prohibited from paying benefits from the Fund to the Applicant (Exhibit R3, paragraph [86]).

The Tribunal agrees with the Respondent’s submission. There is no evidence that any of these conditions of release were met. The enforceable undertaking signed by the Applicant states that the Trustees were not experiencing any financial hardship which required them to access their superannuation money (T31, page 261). The Applicant also gave evidence at the Tribunal hearing that he was not suffering any financial hardship (transcript, page 30). Additionally, the Tribunal notes that the Applicant had not reached his preservation age, or retired from gainful employment (also being circumstances required by clause 129 of the Trust Deed to pay a benefit to a member from the Fund – see paragraph [13] above).
Consequently, the Tribunal finds that there was a breach of s 34(1) of the SIS Act.
Maintaining the Fund for a purpose other than the provision of benefits
Section 62 of the SIS Act provides that:
(1)Each trustee of a regulated superannuation fund must ensure that the fund is maintained solely:
(a)for one or more of the following purposes (the core purposes):
(i) the provision of benefits for each member of the fund on or after the member's retirement from any business, trade, profession, vocation, calling, occupation or employment in which the member was engaged (whether the member's retirement occurred before, or occurred after, the member joined the fund);
(ii) the provision of benefits for each member of the fund on or after the member's attainment of an age not less than the age specified in the regulations…
(Emphasis omitted.)
The Respondent contends that (Exhibit R3, paragraph [89]) the Corporate Trustee, of which the Applicant was a responsible officer at the relevant time, breached s 62 of the SIS Act because the Fund was maintained for a purpose other than the provision of benefits. As noted above (paragraph [13]), clause 4 of the Trust Deed provided that the sole or primary purpose of the Fund was for the provision of old age pensions (T4, page 25). The Respondent contended that instead, the Fund was being maintained as a source of finance for its members.
The evidence before the Tribunal indicates that the Corporate Trustee did not act consistently with the purpose of being for the provision of old age pensions, that no condition of release was satisfied when payments were made by the Fund to its members, and that the money from the Fund was used for purposes which did not return any income to the Fund.
It was put to the Applicant under cross examination that the purpose of the Fund was to provide personal finance, which the Applicant denied (transcript, page 49). However, when the evidence before the Tribunal is viewed objectively, that is what the Fund was used to do. The Applicant did not act in accordance with relevant provisions of the Trust Deed’s primary purpose to provide for old aged pensions (T4, page 25, clause 4) because almost all of the money in the Fund was withdrawn for a personal (albeit investment) purpose shortly after the Fund’s establishment. More specifically, the Fund was established on 3 February 2011 and in June 2011, August 2011 and November 2011 and June 2012, withdrawals were made totalling $257,796, which resulted in a closing balance as at 30 June 2013 of $11.55 (above, paragraph [21]). These moneys were used to purchase the Investment Property in the personal names of the Applicant and Ms A, and to renovate the property, in order to add to their property portfolio of approximately nine properties (transcript, page 21).
Consequently, the Tribunal finds that s 62 of the SIS Act was also contravened.
Not preparing accounts and statements in accordance with the Regulations
The Respondent also contended that if the payment from the Fund constituted loans in the financial years ending 30 June 2015 and 30 June 2016, then the Corporate Trustee breached s 35B(2) of the SIS Act by not preparing accounts and statements in accordance with the Regulations (Exhibit R3, paragraph [92]).
It is, however, not necessary for the Tribunal to consider this contention due to the Tribunal’s finding above that the loan moneys became a member benefit sometime in the 2015 financial year when a repayment of $6,600 was paid into the Fund. Hence, there was no breach by the Corporate Trustee of s 35B(2) of the SIS Act.
Failing to Lodge annual returns within the relevant reporting periods
The Respondent further contends that the Corporate Trustee breached s 35D of the SIS Act by failing to Lodge annual returns within the relevant reporting periods (Exhibit R3, paragraph [98]).
The relevant section of the SIS Act is s 35D which provides, in part, as follows:
(1) Each trustee of a superannuation entity that was a self managed superannuation fund at any time during a year of income must, within the reporting period, or within such longer period as the Commissioner of Taxation allows, ensure that the Commissioner of Taxation is given a return under this section.
Period of lodgment
(2)The reporting period is the period that begins at the end of the year of income and whose length is:
(a)prescribed by the regulations for the purposes of this paragraph; or
(b)if the length of the period is not prescribed--specified, by legislative instrument, by the Commissioner of Taxation.
(Emphasis omitted.)
As set out in the Table above at paragraph [46], the Fund’s taxation returns for the 2011, 2012, 2013 and 2014 financial years were submitted after the relevant reporting periods. Under cross-examination, the Applicant also accepted that the taxation returns for these financial years were submitted outside the reporting period (transcript, pages 46-47). Accordingly, the Tribunal finds that the late submission of these annual returns were breaches of s 35D(1) of the SIS Act.
Is the correct or preferable decision that the Applicant be disqualified?
In summary, the Tribunal has found that the Corporate Trustee contravened ss 65(1), 82, 83, 109, 34(2), 62, 126A(2)(a) of the SIS Act, and that, at all relevant times, the Applicant was the responsible officer of the Corporate Trustee (s 126A(2)(b) of the SIS Act).
The Tribunal must now consider, in accordance with s 126A(2) of the SIS Act, whether the nature, seriousness or number of the contraventions provides grounds for the disqualification of the Applicant. It is on this issue that the parties have diverging views.
To the Applicant’s credit, at the Tribunal hearing he acknowledged that he had made a mistake and that he had been trying to rectify that mistake by salary sacrificing contributions to the Fund between 2015 until he was given notice of his disqualification in early 2018 (see also Exhibit A2). The Applicant argued that he had not caused harm to anyone other than himself through his omissions. The Applicant submitted that he did not sell the property because it was not valued at the amount claimed by the Respondent, and that if he had sold it to return moneys into the Fund he would have made a loss, which would resulted in insufficient moneys being returned to the Fund. The Applicant further submitted that he made numerous unsuccessful attempts to refinance the loan over the Investment Property in order to repay his share of the money withdrawn from the Fund. The Applicant stated that he had also offered that the ATO could lodge a caveat against the Investment Property to ensure that the money would be returned to the Fund if the property was sold (transcript, page 26; letter from Applicant to ATO dated 10 April 2017 at T56, page 358). He stated that he had been open and transparent with the ATO, and expressed his frustration with the ATO for proceeding to the reviewable decisions despite these efforts. The Tribunal acknowledges the Applicant’s attempts to rectify the contraventions, however at the time that the Applicant did so, numerous and substantial breaches of the SIS Act had already occurred.
The Tribunal notes the number of contraventions – six in total, which occurred over at least a five year period from 2011. These contraventions were subject to civil and criminal penalties under the SIS Act, which indicates their seriousness.
Regarding the nature of the contraventions, they involved withdrawing moneys from the Fund as a loan to members, making investment decisions that were contrary to the purpose of the Fund, and which exposed the Fund to significant financial risk and depleted the Fund within months of its establishment. The money withdrawn comprised almost all of the Fund’s assets, the loans were unsecured, and there were no substantive attempts to repay the money taken from the Fund or to repay any interest until the Applicant repaid $6,600 sometime in 2015. The money was used to finance an Investment Property in the names of the Applicant and Ms A, and not in their capacity as Corporate Trustee of the Fund. No income from the Investment Property was returned to the Fund. Despite the Applicant making salary sacrifice contributions between 2015 and early 2018, the $123,000 balance has still not been repaid and the Applicant’s superannuation has been significantly depleted.
As well as the number and nature of these breaches, the Tribunal is concerned that there is a risk of future non-compliance by the Applicant. The Applicant did not act in accordance with the Fund’s Trust Deed within several months of the Fund’s establishment. The Applicant did not appear to understand his role and duties as a Corporate Trustee. For example, the Applicant made incorrect statements in the Fund’s annual returns for the 2011 and 2012 financial years, namely that the Fund did not loan, lease or invest in related parties, did not hold in-house assets at any time which exceeded 5%, did not loan money to members, and that members did not have personal use of the Fund’s assets. The Applicant did not comply with a verbal agreement made to the auditor for the financial years ending 2012 and 2013 to rectify the breach by paying back the loan in full by 28 February 2015 (paragraphs [28] and [29] above). Further, the Applicant failed to comply with the enforceable undertaking which he gave to the Respondent, albeit due to his difficulty refinancing the loan on the Investment Property and unwillingness to sell the Investment Property which he believed would have resulted in a loss.
The Respondent’s Counsel submitted in closing that the comments of Member Allen in Preuss and Australian Prudential Regulation Authority [2005] AATA 748, at [90], were applicable to the Applicant’s situation:
I have the [sic] mentioned above the importance of superannuation to the community and it is clear that the protection of the public is vital to the ongoing confidence in the superannuation industry. I am by no means satisfied that the applicant had a proper understanding of the role of a trustee and the duties owed by a trustee and a director of a trustee company. Although there was no suggestion of dishonesty or intention to defraud on the part of the applicant, there was, in my opinion, in the attitude of the applicant towards the alleged contraventions, an element of incompetence and a lack of contrition and acceptance of responsibility.
The Tribunal agrees that the comments of member Allen are applicable to the Applicant’s situation. The Tribunal realises that this decision will be disappointing to the Applicant who remains keen to maintain a self-managed superannuation fund. However, the Tribunal is not satisfied that the Applicant has a sufficient understanding, or sufficient skill and diligence to be a trustee of a self-managed superannuation fund. Indeed, he has shown a lack of competence in the management of the Fund. Given the importance of securing superannuation funds so that persons have the benefit of them in retirement, the Applicant’s financial stability in retirement is likely to be better protected if he does not have a self-managed superannuation fund.
On balance, the Tribunal finds that the nature, seriousness and number of the contraventions provide grounds for the Applicant’s disqualification, and that the correct or preferable decision is that the Applicant be disqualified under s 126A(2) of the SIS Act from acting as a trustee or a responsible officer of a superannuation entity.
The Respondent contends that, in the alternative the Applicant is not a fit and proper person to act as a trustee or responsible officer of a trustee of a superannuation fund (Exhibit R3, paragraph [114]). As the Tribunal has decided that the Applicant should be disqualified under s 126A(2), it is unnecessary to decide this alternative contention of the Respondent.
WAS THE PROVISION OF COMMISSIONER’S DECISION NOT TO REDUCE SHORTFALL INTEREST CHARGES FOR THE YEAR ENDED 30 JUNE 2015 EXCESSIVE OR OTHERWISE INCORRECT?
Section 304-10 of the Income Tax Assessment Act 1997 (Cth) (Assessment Act) relevantly provides:
Superannuation benefits in breach of legislative requirements etc.
(1)Include in your assessable income the amount of a *superannuation benefit if:
(a)any of the following applies:
(i) you received the benefit from a *complying superannuation fund or from a *superannuation fund that was previously a complying superannuation fund;
(ii) the benefit is attributable to the assets of a complying superannuation fund or from a superannuation fund that was previously a complying superannuation fund; and
(b)any of the following applies:
(i) the fund was not (when you received the benefit) maintained as required by section 62 of the Superannuation Industry (Supervision) Act 1993;
(ii) you received the benefit otherwise than in accordance with payment standards prescribed under subsection 31(1) of the Superannuation Industry (Supervision) Act 1993.
Further, s 14ZZK of the Taxation Administration Act 1953 (Cth) (Administration Act), provides:
On an application for review of a reviewable objection decision:
(a)the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and
(b)the applicant has the burden of proving:
(i) if the taxation decision concerned is an assessment—that the assessment is excessive or otherwise incorrect and what the assessment should have been; or
(ii) in any other case—that the taxation decision concerned should not have been made or should have been made differently.
The Respondent contends that when the money removed from the Fund changed from being a loan to a member benefit, it fell within the Applicant’s assessable income (Exhibit R3, paragraph [117], [121] and [122]). The Applicant, on the other hand, contended that at all times the money withdrawn from the Fund was a loan, and that it should not be included in his assessable income.
The Applicant also expressed concerns that he had been treated unfairly in comparison with his former spouse, Ms A. The Tribunal can, however, only review the decisions before it and the specific evidence before the Tribunal, and so how the ATO has assessed another tax payer is irrelevant to the Tribunal’s deliberations. Additionally, the Tribunal notes that as Ms A had repaid her portion of the loan, it meant that she had not received a member benefit in the financial year ending 30 June 2015, for the purposes of s 304-10 of the Assessment Act.
Earlier in these reasons for decision, the Tribunal found that when the payment of $6,600 was made into the Fund during the 2015 financial year, the money ceased to be a loan and became a member benefit. It was therefore assessable income. Specifically, each of the elements in s 304.10(1) of the Assessment Act are satisfied, namely:
(a)The Applicant received a benefit of $122,298 from the assets of the Fund, which is a complying superannuation fund (s 304.10(1)(a)(i) and (ii)); and
(b)The Fund was not maintained as required by s 62 of the SIS Act (s 304.10(1)(b)(i)) because it was maintained for a purpose other than the provision of benefits, and the Applicant received the benefit otherwise than in accordance with the payment standards prescribed under s 31(1) of the SIS Act (s 304.10(1)(b)(ii)) because none of the conditions of release specified in Schedule 1 of the SIS Regulations had been met at the time the money ceased to be a loan and became a member benefit.
At the Tribunal hearing, the Applicant also expressed frustration that the amount of additional income taxation he must pay under the amended assessment could instead be applied toward repaying the money withdrawn back into the Fund (transcript, page 66). Further, as noted above (paragraph [116]), the Applicant took responsibility for his mistake, tried to rectify it through financing (which was unsuccessful) and salary sacrificing additional payments. The Applicant stated at the Tribunal hearing that he has learned from his mistakes and that he wants to maintain and grow his superannuation (transcript, page 49).
However, despite the Applicant’s good intentions, there are significant taxation concessions applied to superannuation contributions and earnings, and those concessions cannot continue to be enjoyed when funds are withdrawn, contrary to the legislation. In this regard, the Tribunal notes the comments of Member Allen in the decision of Preuss which are directly applicable. Member Allen stated at [87]:
Superannuation is compulsorily provided to employees as part of their terms of employment and, at the time in question, employees did not generally have a choice as to which fund their monies were paid into. Further, superannuation is a long term investment and generally inaccessible to employees for long periods of time, and there are significant taxation concessions for superannuation contributions and earnings. In such circumstances any failure by the trustee of a superannuation fund and the directors thereof to meet the obligations imposed by the Act and the general law with the consequence that funds are lost, is serious. Good intentions and trust can be no substitute for proper structures and procedures and the applicant failed to exercise the degree of involvement, skill and diligence that is expected.
In conclusion, the Tribunal finds that the amount of the Applicant’s member benefit of $122,298 was correctly included as part of the Applicant’s assessable income and that the Applicant has not discharged his burden of proving, pursuant to s 14ZZK(b)(i) of the Administration Act, that the assessment is excessive or otherwise incorrect.
CONCLUSION
For the reasons outlined above, the correct or preferable decision is that the Applicant should be disqualified under s 126A(2) of the SIS Act from acting as a trustee or a responsible officer of a superannuation entity.
Further, the Applicant has been unable to discharge his burden of proving that his income tax assessment for the financial year ending 30 June 2015 was excessive or otherwise incorrect.
DECISION
For the reasons outlined above, the:
(a)Tribunal extends the time for the lodgement of the Applicant’s application for review of the Reviewable Decision dated 10 January 2018 to 6 March 2018.
(b)Reviewable Decision made under s 126A of the Superannuation Industry (Supervision) Act 1993 (Cth) dated 10 January 2018 (First Reviewable Decision) is affirmed.
(c)Reviewable Decision dated 18 June 2018 (Second Reviewable Decision) is affirmed.

I certify that the preceding 134 (one hundred and thirty-four) paragraphs are a true copy of the reasons for the decision herein of Senior Member Dr M Evans

...................[sgd].....................................
Associate
Dated: 5 June 2019

Date of hearing:

14 February 2019

Applicant:   Self-represented
Counsel for Respondent:    Ms R Young, Fourth Floor Chambers
Solicitor for Respondent:    Mr K Chu, Minter Ellison Lawyers

[2019] AATA 1236

5 June 2019

Key Legal Topics

Areas of Law

Tax Law

Administrative Law

Legal Concepts

Statutory Construction

Judicial Review

Remedies

Procedural Fairness

Appeal

Financial year	Tax return due	Date of lodged return	Amount of recorded loan	Total assets of the Fund reported	Loan as a percentage of assets _	To whom the loan was made
2011	28 February 2012	29 August 2012	$200,000	$205,176	97.94%	The Applicant and Ms A
2012	5 June 2013	25 November 2014	$257,796	$257,808	99.99%	The Applicant and Ms A
2013	31 October 2013	25 November 2014	$257, 796	$257,808	99.99%	The Applicant and Ms A
2014	31October 2014	10 June 2015	$257,796	$257,808	99.99%	The Applicant and Ms A
2015	14 June 2016	26 May 2016	$122,298	$122,697	99.67%	The Applicant
2016	30 June 2017	15 June 2017	$122,298	$162,395	75.31%	The Applicant