Goulopoulos and Commissioner of Taxation - [2022] AATA 2540

Goulopoulos and Commissioner of Taxation [2022] AATA 2540 (9 August 2022)

Division:TAXATION AND COMMERCIAL DIVISION
File Number: 2021/3100
Re:Andrew Goulopoulos
APPLICANT

AndCommissioner of Taxation
RESPONDENT

DECISION

Tribunal:Deputy President I R Molloy
Date:9 August 2022
Place:BRISBANE

The reviewable decision that the Applicant be disqualified is affirmed.

.............[SGD]...........................................................

Deputy President I R Molloy

Catchwords

SUPERANNUATION – self-managed superannuation fund – disqualification of individual as responsible officer of corporate trustee - number, nature and seriousness of contraventions – fit and proper person – Tribunal’s powers – power not relied on by decision-maker - decision affirmed

Legislation

Administrative Appeals Tribunal Act 1975 (Cth)
Bankruptcy Act 1966 (Cth)
Superannuation Industry (Supervision) Act 1993 (Cth)

Cases

Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321
Australian Securities and Investments Commission v Donald [2003] FCAFC 318

AustralianSecurities and Investments Commission v Donald [2003] 136 FCR 7

Australian Skills Quality Authority v Brighton Pacific Pty Ltd [2020] FCA 617

Comcare v Burton (1998) 50 ALD 846
Commissioner of Taxation v Coronica [2022] FCA 72

Commonwealth Bank Officers Superannuation Corporation Pty Ltd v Commissioner of Taxation (2005) 148 FCR 427

Davies v Australian Securities Commission [1995] FCA 1496
Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577

Fletcher v Commissioner of Taxation (1988) 19 FCR 442

Frugtniet v Australian Securities and Investments Commission (2019) 367 ALR 695; [2019] HCA 16

Hughes and Vale Pty Ltd v State of NSW (1955) 93 CLR 127
Re Control Investment Pty Ltd and Australian Broadcasting Tribunal (No 2) (1981) 3 ALD 88
VCA v Australian Prudential Regulation Authority [2008] AATA 580
Stasos v Tax Agents Board (1990) 21 ATR 974

Secretary, Department of Employment, Education, Training and Youth Affairs v MacKay (1998) 29 AAR 95; (1998) 58 ALD 130

Secretary, Department of Social Security v Hodgson (1992) 37 FCR 32

Shi v Migration Agents Registration Authority (2008) 235 CLR 286

REASONS FOR DECISION

Deputy President I R Molloy

9 August 2022

The Applicant, Andrew Goulopoulos, and his wife, Valentina Goulopoulos, were the responsible officers of the corporate trustee of the Goulopoulos Superannuation Fund (the Fund). As the responsible officers, they were responsible for ensuring that the Fund was operated in accordance with the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act or the Act).
On 23 August 2019, a Deputy Commissioner of Taxation, as delegate of the Respondent, notified the Applicant and his wife that he had disqualified them. The disqualifications were on the basis that the corporate trustee had contravened the SIS Act on one or more occasions when they were its responsible officers, and the nature, number or seriousness of the contraventions provided grounds for disqualifying them under s 126A(2) of the SIS Act.[1]
[1] T39, page 929 and T40, page 932.
The decision under review is the Commissioner’s decision of 15 April 2021 to confirm the disqualification decision in respect of Mr Goulopoulos.[2] I was informed at the commencement of the hearing that Mrs Goulopoulos’s application for review of the Commissioner’s decision as confirmed that she be disqualified, which was set down for hearing at the same time, was withdrawn.[3]
[2] T2, pages 39-75; and T54, page 971.
[3] Proceeding 2021/3101.

BACKGROUND

The Fund was established as a Self-Managed Superannuation Fund (SMSF) by Deed executed on 26 October 2007. The members of the Fund were the Applicant and his wife. The corporate trustee of the Fund was A & V Goulopoulos Pty Ltd (the Corporate Trustee), which was incorporated on the same date. From the time of the Fund’s incorporation, and all relevant times, the Applicant and his wife were directors of the Corporate Trustee. They are also its shareholders.
The Applicant was and is a Director and the General Manager of Andorra Australia Pty Ltd as trustee for the Andorra Trust (the Andorra business or business). The business is a manufacturer and importer of intimate apparel, which supplies the Australian and international market. The Applicant’s father, Sam Goulopoulos, has been a Director of the business since 1997. The Applicant runs the business, and is involved in the decision-making together with his father, and is now the Managing Director.
The Andorra Superannuation Benefit Fund (the Benefit Fund), which was also a SMSF, was a related party of the Fund. The corporate trustee of the Benefit Fund was Desbele Pty Ltd. The Applicant was a Director of Desbele Pty Ltd[4] and a member of the Benefit Fund until about 12 November 2008. The other members of the Benefit Fund and Directors of Desbele Pty Ltd were Sam Goulopoulos and Margaret Goulopoulos, the parents of the Applicant.
[4] ST30, page 1079.

ISSUES

The provisions of the SIS Act most relevant to this application are
sub-sections (2) and (3) of s 126A, which provide:
126A The Regulator may disqualify individuals
…
(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 responsibleofficer 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.

(3) The Regulator may disqualify an individual if satisfied that the individual is otherwise not a fit and proper person to be a trustee, investment manager or custodian, or a responsible officer of a body corporate that is a trustee, investment manager or custodian.

The Regulator referred to in s 126A(2) and (3) of the Act, so far as concerns this application, is the Commissioner of Taxation.[5]
[5] SIS Act, ss 6(1) and 10(1).
The Respondent submits that the issues are whether the Tribunal, standing in the shoes of the Commissioner, is satisfied:
(a)the correct or preferable decision is that the Applicant be disqualified under s 126A(2) of the SIS Act because he was a person who is, or was, a responsible officer of a Trustee, investment manager or custodian which had contravened the SIS Act on more than one occasion and the nature or seriousness of the contraventions, or the number of contraventions, provide grounds for his disqualification; and
(b)further or alternatively, the correct or preferable decision is that the Applicant be disqualified under s 126A(3) of the SIS Act on the ground that he is otherwise not a fit and proper person to be a trustee, investment manager or custodian, or a responsible officer of a body corporate that is a trustee, investment manager or custodian.
I accept that these are the issues. The Applicant disputes the Respondent’s reliance on s 126A(3) of the SIS Act, and submits that the Tribunal is confined to considering disqualification only under s 126A(2), being the provision upon which the Commissioner relied in reaching the reviewable decision.
I do not accept the Applicant’s submission, as explained later in these reasons. I will refer first to the issue under s 126A(2) of the Act including the alleged contraventions.

SECTION 126A(2) - CONTRAVENTIONS OF THE ACT

A “responsible officer”, in relation to a body corporate, includes a director, secretary or executive officer of the body: SIS Act, s 10. I am satisfied, and it is not disputed, that the Applicant was at all relevant times a responsible officer of the Corporate Trustee of the Fund.
The Respondent relies on the following alleged contraventions of provisions of the Act:[6]
(a)section 34: Prescribed operating standards must be complied with;
(b)section 35D: Trustee to lodge annual returns;
(c)section 62: Sole purpose test;
(d)section 65: Lending to members of regulated superannuation fund prohibited;
(e)section 66: Acquisitions of certain assets from members of regulated superannuation funds prohibited;
(f)section 67: Borrowing;
(g)section 84: In-house asset rules must be complied with;
(h)section 109: Investments of superannuation entity to be made and maintained on arm's length basis.
[6] SIS Act, ss 34, 35D, 62, 65-67, 84 and 109.
The Respondent also relied on a ninth alleged contravention, under s 126K of the Act, whereby a person who is “a disqualified person” commits an offence if, knowing that he or she is disqualified, inter alia, acts as a responsible officer of a body corporate that is a trustee of a superannuation entity. Any such contravention, however, is by the disqualified person, rather than for present purposes the corporate trustee.
While the Applicant accepts that the alleged contraventions occurred while he was a responsible officer of the Fund, and on the material before me I am satisfied of those matters, it is necessary to refer to the facts and circumstances, so as to appreciate the number of occasions, the nature, and/or the seriousness of the contraventions, as prerequisites to enlivening the discretion whether to disqualify under s 126A(2) of the Act.

Breach of prescribed operating standards – s 34 of the SIS Act

Section 34(1) of the SIS provides that a Trustee of a superannuation entity must ensure that the prescribed standards applicable to the superannuation fund's operation are always complied with at all times.
The operating standards for the payment of superannuation benefits prescribed under s 31 of the SIS Act provide that a member's preserved benefits must only be cashed on or after the satisfaction of a condition of release. The conditions of release include retirement, death, permanent incapacity, severe financial hardship, attaining age 65, and compassionate grounds.
In the years ended 30 June 2013 and 30 June 2014 payments were made from the Fund which did not meet the conditions of release. On 27 August 2012, the Applicant caused the amount of $9,105.55 to be withdrawn from the Fund. This was the first withdrawal of 18 withdrawals, totalling $665,990.86, that the Applicant caused to be made over the 2013 year including an amount of $260,000.00 withdrawn on 12 September 2012.
The Applicant’s explanation for the withdrawals was he needed money, including in respect of a new house, described in hearing as the Lower Plenty property (bought in his wife’s name), and which he and his wife were renovating. As he presented the situation, the Applicant was left with little choice but to make the withdrawals, but I do not accept that explanation. I accept the Respondent’s submission that the Applicant has compressed the chronology of events, including the house purchase, the renovations, and the Andorra business being placed under credit control, so as to suggest his actions were unavoidable. I am satisfied there was nothing unavoidable in his making the withdrawals. He chose the Fund as an available source of funds, when there were other options available, including simply not incurring or moderating expenditures.
As the Respondent also points out, monies were withdrawn from the Fund for the acquisition of a luxury vehicle. On about 26 September 2012, the Applicant on behalf of his business, purchased a new Mercedes Benz E63 motor vehicle from a dealer 3 Point Motors. The total purchase price was $276,000, including the AMG performance option, and the total changeover cost was $294,293.16 (after taking into account the negative equity in a Maserati Quattroporte vehicle being traded-in). The Applicant initially caused $17,293 to be paid from the Fund to 3 Point Motors in respect of the Mercedes, and on 8 November 2012 caused a further amount of $109,490.01 to be paid from the Fund in respect of the vehicle. The Mercedes was used by the Applicant as his primary vehicle.
The Applicant accepted that, as the decision-maker with regard to the purchase of the Mercedes, he could have just as well bought a much less expensive vehicle. He also accepted he never told his accountant, Noel Gibson of Lipins Partners, that he was taking money out of the Fund to pay for the Mercedes. Andorra never repaid the Fund the amount used to pay for the vehicle. The Applicant claimed he was not able to arrange payment because the Andorra business was in credit control by its bank. He was not able to provide any reasonable explanation why the business, even after it came out of credit control, could not repay the Fund, despite the fact that the vehicle was accounted for as an asset of the company, or why he had not taken any steps to have the company to repay the Fund for the vehicle bought in its name.
By 8 November 2012, the Applicant had withdrawn $468,888 from the Fund, being over half of the funds that the Applicant ultimately withdrew from the Fund in the 2013 and 2014 financial years. At the time of withdrawing these funds, the Applicant’s business was not subject to any credit control imposed by its bank, and the Applicant had not yet entered into a building contract for the renovation of the Lower Plenty property.
Overall, the Fund’s bank records[7] and general ledger[8] record that the corporate trustee caused or allowed:
(a)a total of $878,365.86 to be withdrawn from the Fund; and
(b)a total of $52,436.26 to be repaid to the Fund
in the 2013 year to the 2014 year, resulting in a net withdrawal of $825,929.60 from the Fund in those years; and
(c)$819,721.87 to be written off in the 2018 year.
[7] ST34.
[8] T23.
The Applicant caused each of the payments to be withdrawn from the Fund. The Applicant’s practice was to authorise the transactions through Andorra’s internal accountant who had access to the Fund’s bank account. There is a question whether the payments from the Fund, or some of them, were early withdrawals of superannuation benefits without the Applicant or his wife satisfying a condition of release, contrary to section 34 of the SIS Act, or loans to a member or members attracting section 65 of that Act.
There was no written loan agreement or other contemporaneous documentation evidencing a loan. No security was given. Nothing was recorded initially or at all to indicate interest was payable. Some payments, that the Applicant claimed to be loan repayments, were made to the Fund in the 2013 year, however, after
30 June 2013, no further payments were made to the Fund until 17 July 2017, when $6,207.73 was received as a final dividend in the Applicant’s bankruptcy.
The Applicant said he was told by his accountant, Noel Gibson, that “5% of super is considered junk” and that he could use that for his own use, “but replace it in the same year”. The Applicant claimed that he made the withdrawals from the Fund with his accountant’s advice “ringing in his ears”. The Applicant gave several versions of what and when he was told this by Mr Gibson.
Mr Gibson denied he ever told the Applicant any such thing but was confident that no-one in his firm would have told the Applicant that. Mr Gibson struck me as resolute, professional and honest. Having seen and heard both the Applicant and Mr Gibson give evidence, I am satisfied that Mr Gibson’s evidence is to be preferred. Whether or not the Applicant was told by someone else that 5% of superannuation was “junk”, a description which was never really explained, he was always aware that the payments from the Fund were not permitted.
I infer that initially the Applicant had some intention to repay to the Fund the monies which were withdrawn. Whether these could be properly characterised as loans is another matter. I am satisfied, however, that as the Applicant dug deeper into the Fund he had no real intention of repaying what was being withdrawn. Apart from claiming “that he intended to return the money to the fund”, the Applicant relies on the monies being treated as loans in the Fund’s accounts, and that the Fund “proved the debt in the Applicant’s personal insolvency agreement.”[9]
[9] Applicant’s Closing Submissions, [18] & [23].
The characterisation of the withdrawals was not explored, because the Applicant expressly admitted at the outset, and in the course of the hearing, contraventions of section 34 of the Act.[10] In the Applicant’s closing submissions, it was acknowledged “it’s probably, technically, true that he’s breached both sections 34 and 65. … And it might be that you don’t need to make reference to either 34 or 65.”[11] I think that is right. In the context of all that occurred it would make no difference to my decision whether particular withdrawals were or were not classified as loans. As the Respondent submits, either way the contraventions were very serious.[12]
[10]    Transcript page 54 lines 33-39.
[11]    Transcript page 174 lines 25-25 & 33-34.
[12]    Transcript, page 198 line 4.
I accept that the corporate trustee of the Fund contravened s 34(1) of the SIS Act by failing to ensure the prescribed standards were complied with by allowing a member’s benefit to be paid out of the Fund to the Applicant, or to his benefit, in the 2013 year and the 2014 year, in breach of the operating standards.

Requirement to lodge annual returns – s 35D of the SIS Act

Under s 35D(1) of the Act, each trustee of a superannuation entity that was an SMSF at any time during that income year must, within the reporting period or within such longer period as the Commissioner allows, ensure that the Commissioner of Taxation is given an annual return.
The corporate trustee contravened s 35D(1) by failing to ensure that the Fund lodged its annual returns on time for the year ending 30 June 2009, and for each year during the four (4) year period from the 2013 year to the year ended 30 June 2016. The 2009 return was lodged on 21 June 2010 (42 days late). The 2013, 2014, 2015 and 2016 returns were not lodged until May/June 2017. The Applicant could not provide any satisfactory explanation as to why these annual returns were not lodged at an earlier time.
Following the lodgement of the Fund’s outstanding returns in mid-2017, the Fund’s new auditor lodged contravention reports for the Fund for the six (6) year period ended 30 June 2013 to 30 June 2018, which detailed contraventions of ss 17A, 62, 65 and 67 of the SIS Act in that period.

Breach of sole purpose test – s 62 of the SIS Act

By section 62(1) of the SIS Act, the trustee of a regulated superannuation fund (which includes an SMSF) must ensure that the fund is maintained solely for one or more of the specified “core purposes”, or for one or more of the core purposes and for one or more of the “ancillary purposes”. In general terms, the core purposes relate to the provision of retirement benefits for each member of the fund, or consequent upon termination of the member’s employment.
I accept the Commissioner’s submission, and it is not disputed, that the Fund was not maintained in accordance with the sole purpose test and the Corporate Trustee thereby contravened s 62 of the SIS Act by reason of the following transactions:
(a)making a loan to the Applicant, and The Andorra Superannuation Benefit Fund and Andorra Australia Pty Ltd in the 2013 year, and to The Andorra Trust in the 2014 year;
(b)providing the Applicant access to superannuation benefits without him meeting a condition of release in the 2013 year and in the 2014 year; and
(c)borrowing money from related parties, namely The Trustee for S & A Super Fund in the 2013 income year, and from The Andorra Trust in the 2014 year and maintaining the existing borrowing in the 2015 to the year ended 30 June 2018.

The Respondent’s submissions, which I accept, are that the amounts owing to the Fund from The Andorra Superannuation Benefit Fund arose because of the Fund collecting trust distributions from the Piangil Asset Trust - 2007 and paying legal expenses on behalf of The Andorra Superannuation Benefit Fund.
There was no loan agreement or other documentation substantiating the loan. No interest was charged on the loan. No security was held by the Fund over the loan. Accordingly, as the Commissioner submits, the loan to The Andorra Superannuation Benefit Fund was not made on an arm’s length basis, and the terms and conditions of the transactions were more favourable than would be expected if the Fund was dealing at arm's length in contravention of s 109 of the SIS Act.
The Applicant was a member of The Andorra Superannuation Benefit Fund until the 2009 year. The other members, and directors of the corporate trustee, were the Applicant’s parents. Therefore, the Benefit Fund was a related party of the Fund. The Commissioner submits, and I accept, the Fund’s general ledger records that the outstanding loan to the Benefit Fund as at 30 June 2013 (that is, $3,799.65) was offset on 1 July 2013 to the borrowing from The Andorra Trust. This created a loan, albeit briefly, to The Andorra Trust in the 2014 year. The loan to The Andorra Trust, as the Commissioner submits, was also not made on an arm’s length basis, and the terms and conditions of the transactions were more favourable than would be expected if the Fund was dealing at arm's length in contravention of s 109 of the SIS Act.

Lending to members – s 65 of the SIS Act

Section 65(1) of the Act inter alia prohibits a trustee of a regulated superannuation fund (including an SMSF) lending money of the fund to a member of the fund or a relative of a member of the fund or giving any other financial assistance using the resources of the fund to a member of the fund or a relative of a member of the fund.
There is, as I have said, a question-mark over whether certain payments from the Fund for the benefit of the Applicant and/or his wife were unauthorised releases or loans. So far as they were loans, which is the Applicant’s contention, the corporate trustee contravened s 65 of the SIS Act. The Applicant submits that “the Respondent has demonstrated confusion about whether the withdrawals constituted access to the fund or borrowing.”[13] The situation, of course, is of the Applicant’s making. In considering the number and nature of the contraventions of the SIS Act, whether loans or early releases, I am conscious to avoid duplication.
[13] Applicant’s Closing Submissions, [26].

Contravention for acquisition of certain assets from members – s 66 of the SIS Act

Section 66(1) of the Act prohibits a trustee from intentionally acquiring an asset from a related party of the fund. Section 66(2) excludes certain acquisitions from the prohibition contained in subsection (1), being the acquisition of listed shares and business real property, if acquired at market value. Section 66(2A) excludes the acquisitions of certain ‘in-house’ assets that are acquired at market value where the acquisition would not breach the level of in-house assets permitted by Part 8 of the Act.
I accept the Respondent’s submission that in the 2009 year, the Fund acquired, by way of a rollover from a related party of the Fund, namely The Andorra Superannuation Benefit Fund, seventy-five (75) units in an unlisted trust in contravention of s 66 of the SIS Act.

Contravention for borrowing – s 67 of the SIS Act

Under s 67 of the SIS Act, a trustee of a regulated superannuation fund, including SMSF trustees, subject to limited exceptions, must not borrow money, or maintain an existing borrowing except in certain prescribed circumstances which are found in section 67A and 67B.
I accept that in contravention of s 67, the corporate trustee for the Fund borrowed from two related parties, namely from:
(a)The Trustee for S & A Super Fund in the 2013 year; and
(b)The Andorra Trust in the 2014 year and maintained its borrowing until the 2018 year, at which point the Fund again borrowed from The Andorra Trust.

Breach of in-house asset rules – s 84 of the SIS Act

Under s 84 of the SIS Act, each trustee must take all reasonable steps to ensure that the in-house asset rules (as set out in Division 3 of Part 8 of the SIS Act) are complied with.
Section 83 of the SIS Act requires that the trustee must not acquire new
in-house assets if the market value ratio of the fund’s in-house assets exceeds 5%, or if the acquisition of the in-house asset would result in the market value ratio of the fund’s in-house assets exceeding 5%. Under s 82 of the Act, if the market value ratio of the fund’s in-house assets exceeds 5%, the trustee of the fund must prepare a written plan before the end of the following tax year, setting out the steps which the trustee proposes to take to dispose of the requisite value of assets.
The corporate trustee contravened s 84 of the SIS Act by not making sure that its in-house assets in the 2013 year (comprising a loan to the Applicant, and other related parties, Andorra Australia Pty Ltd and The Andorra Superannuation Benefit Fund and The Andorra Trust) did not exceed 5% of its total assets, and did not make any plan in respect of the excess in-house assets.

Requirement that investments are on arm's length basis – s 109 of the SIS Act

Section 109 obliges a trustee to make investments at arm’s length or to deal with the other party on an arm’s length basis.
The corporate trustee contravened s 109 of the SIS Act by reason of the fact that the Fund lent money to the Applicant, and related parties (namely, The Andorra Superannuation Benefit Fund and Andorra Australia Pty Ltd, and The Andorra Trust) in the 2014 year other than on an arm’s length basis. It is not contended by the Applicant that any of these loans were made at arm’s length or on an arm’s length basis.

Disqualification following contraventions of the SIS Act

To reiterate, under s 126A(2) of the SIS Act an individual who is, or was, a responsible officer of a body corporate, may be disqualified if:
(a)the body corporate has contravened the SIS Act … 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.
These matters must be satisfied before the exercise of the discretion to disqualify under s 126A(2) is enlivened.[14] As I have said, it is not disputed, and I am satisfied that the Applicant was at all material times a responsible officer of the corporate trustee. I am satisfied that the corporate trustee has contravened the SIS Act on a number of occasions as referred to above.
[14] Commissioner of Taxation v Coronica [2022] FCA 72, [15] (per Davies J).
The nature, seriousness, and the number of the contraventions provide, in my view, grounds for disqualification of the Applicant. The Applicant submits that the Respondent has not shown how the contraventions are serious. I do not accept that submission. It is evident from the facts outlined above that the contraventions, especially those involving the unauthorised drawings or member loans from the Fund, are serious. The Fund was virtually depleted of all of its funds. The failure to lodge returns for multiple years, especially in the context of the other contraventions, are also particularly serious matters.
The Applicant contends the Respondent has not demonstrated “that he has applied any analysis by reference to the nature, number and/or seriousness of the contraventions”.[15] The Applicant relies on the fact that the Respondent, for the most part, did not impose penalties for the contraventions, which he submits indicates they were not serious.[16] He submits that the Respondent, by only imposing a penalty for the Fund maintaining borrowings, has effectively accepted that the number of breaches was low.[17]
[15]    Applicant’s Closing Submissions, [13] & [39(c)].
[16]    Ibid, e.g. [26] & [39(c)].
[17]    Ibid, [67].
The Applicant, whilst expressly acknowledging “that all breaches are serious”, submits that “the only objective criterion of assessing the seriousness is the penalties the Respondent has imposed.”[18] I do not accept those submissions. The reasons for imposing or not imposing penalties were not explored. Nor would that line of enquiry be helpful in deciding the issues in this merits review.
[18] Ibid, [68].
I am satisfied, based on what I have outlined above, that the nature, seriousness and the number of contraventions enliven the jurisdiction to disqualify the Applicant.
I accept the Respondent’s submission that the discretion to disqualify an individual must be exercised bearing in mind the purpose for which the SIS Act was enacted.[19] The “immediate object” of the SIS Act, as expressed in s 3, is to make provision among other things for “the prudent management” of certain superannuation funds and for their supervision by the relevant regulator including the Commissioner of Taxation. Legislation provides taxation benefits to trustees of superannuation funds and its members to encourage provision by Australians for their retirement in return for the responsible management of those funds.
[19] VCA v Australian Prudential Regulation Authority [2008] AATA 580, [537].
The Respondent submits that the decision to disqualify the Applicant should be affirmed having regard to the matters referred to above, and also places emphasis on the following matters, all of which I am satisfied are supported by the evidence:
(a)Over the course of 13 months, between August 2012 and September 2013, the Applicant withdrew the net amount of $825,000 from the Fund. He used these illegally withdrawn funds, among other things, to pay for a luxury motor vehicle for his personal use and for renovations to his new residence. By 2015, the illegally withdrawn funds comprised the whole of the Fund’s assets.
(b)Despite his saying his accountant “planted the seed” (which I do not accept) the Applicant acted well outside what he claimed his accountant told him. He knew what he was doing was wrong. There was no necessity for his conduct.
(c)The Fund under the control of the Applicant and his wife failed to lodge any annual returns for four and a half years, from November 2012 until mid-2017. The Applicant submits, in this regard, as I understand it, that “it is open to infer the number of breaches was not high because … no penalties were imposed for this.”[20] I do not accept that submission. There were multiple failures spanning a number of years.
(d)The failure to ensure that the Fund's annual returns were lodged on time for the 2013 year to the 2016 year meant the Commissioner was not aware of the contraventions and possibly deprived of the opportunity of ensuring some redress before the Fund was wound up.
[20] Applicant’s Closing Submissions, [24].
I accept the Respondent’s submission that the nature, number, and seriousness of the contraventions of the SIS Act each justify the Applicant being disqualified from acting as a trustee, investment manager or custodian, or a responsible officer of a body corporate that is a trustee, investment manager or custodian.
I also accept the submission that any undertaking offered by the Applicant is not sufficient or appropriate in the circumstances, and will not satisfactorily mitigate the Applicant’s future compliance risk if he were allowed to act as a trustee, investment manager or custodian or as a responsible officer of a corporate trustee of an SMSF in the future. I am not satisfied that, by not taking action to disqualify the Applicant, there will be future compliance with the Act.
In the exercise of my discretion, having regard to s 126A(2) of the SIS, I consider that the correct and preferable decision is that the Applicant be disqualified.

SECTION 126A(3) – FIT AND PROPER PERSON

Further and in the alternative, the Respondent submits that pursuant to
s 126A(3) of the SIS Act, the Applicant is not otherwise a fit and proper person to carry out the office of trustee, investment manager, custodian, or a responsible officer of a body corporate that is a trustee, investment manager or custodian, and in consequence should be disqualified.
As I have said, the Applicant submits that the Tribunal in this review is limited to considering s 126A(2) of the SIS Act, being the basis upon which the Commissioner, as Regulator, made the reviewable decision disqualifying the Applicant. As I have also said, I do not accept that. I should also say, at the outset, it was expressly conceded on behalf of the Applicant that he had sufficient notice that the Respondent would be relying on s 126A(3) of the Act to affirm the reviewable decision, and in that regard, he had a reasonable opportunity to be heard (and was heard).[21]
[21] Transcript, page 173, lines 4-6.
The SIS Act, under section 344, provides a right of review of certain decisions. Relevantly, that section provides:
344 Review of certain decisions
Request for review
(1) A person who is affected by a reviewable decision of the Regulator may, if dissatisfied with the decision, request the Regulator to reconsider the decision.
…
Regulator to reconsider decision
(4) Upon receipt of the request, the Regulator must reconsider the decision and may, subject to subsection (5), confirm or revoke the decision or vary the decision in such manner as the Regulator thinks fit.
Deemed confirmation of decision if delay
(5) If the Regulator does not confirm, revoke or vary a decision before the end of the period of 60 days after the day on which the Regulator received the request under subsection (1) to reconsider the decision, the Regulator is taken, at the end of that period, to have confirmed the decision under subsection (4).
Notice of Regulator's action
(6) If the Regulator confirms, revokes or varies a decision before the end of the period referred to in subsection (5), the Regulator must give written notice to the person telling the person:
(a) the result of the reconsideration of the decision; and
(b) the reasons for confirming, varying or revoking the decision, as the case may be.
…
AAT review of Regulator's decisions
(8) Applications may be made to the Administrative Appeals Tribunal for review of decisions of the Regulator that have been confirmed or varied under subsection (4).
…
The Applicant referred to s 344(8) of the SIS Act in support of his submission that the Tribunal was limited in its powers of review. That provision creates a right of review, as envisaged by s 25(1) of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act). The powers of the Tribunal, however, in relation to matters in which it has jurisdiction, are contained in s 43(1) of the AAT Act.[22]
[22] Comcare v Burton (1998) 50 ALD 846 at 851 (per Finn J); quoted in Australian Securities and Investments Commission v Donald [2003] FCAFC 318, [32] (per Kenny J).
Subsection 43(1) of the AAT Act provides:
43 Tribunal's decision on review
…
(1) For the purpose of reviewing a decision, the Tribunal may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision and shall make a decision in writing:
(a) affirming the decision under review;
(b) varying the decision under review; or
(c) setting aside the decision under review and:
(i) making a decision in substitution for the decision so set aside; or
(ii) remitting the matter for reconsideration in accordance with any directions or recommendations of the Tribunal.
…
In Re Control Investment Pty Ltd and Australian Broadcasting Tribunal (No 2)[23] Davies J, as President of the Tribunal, said in relation to s 43(1) of the AAT Act that:
“[T]he provision ‘For the purpose of reviewing a decision, the Tribunal may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision … ’ is not concerned to confer upon the Tribunal authority to limit its function but rather to confer upon it an amplitude of powers so that the Tribunal may exercise, if it is convenient and useful to do so, not only the decision-making power upon which the decision-maker relied, but all relevant powers and discretions which were conferred by the enactment upon the decision-maker. The provision extends the authority of the Tribunal so that it may more adequately exercise its function of reviewing on the merits the subject decision.”
[23] (1981) 3 ALD 88, 92.
The effect of s 43(1) of the AAT Act is that, “[f]or the purpose of reviewing a decision”, the Tribunal stands in the place of the original decision-maker. For the purpose of determining whether the decision under review was the correct or preferable decision on the material before it, the Tribunal “may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision.” It is not confined to the decision-making power upon which the previous decision-maker actually relied in making the decision under review but is armed with all the powers and discretions of the original decision-maker that are relevant to the review.[24]
[24] See also Fletcher v Commissioner of Taxation (1988) 19 FCR 442, 453 (per Lockhart, Wilcox & Burchett JJ); Secretary, Department of Social Security v Hodgson (1992) 37 FCR 32,39–40 (Hill J); Secretary, Department of Employment, Education, Training and Youth Affairs v MacKay (1998) 29 AAR 95 ((1998) 58 ALD 130 (per Kenny J); AustralianSecurities and Investments Commission v Donald [2003] 136 FCR 7, [23]-[29] (per Kenny J, Gray J agreeing) and [46]-[47] (per Downes J); Commonwealth Bank Officers Superannuation Corporation Pty Ltd v Commissioner of Taxation (2005) 148 FCR 427, [29]-[30] (per Finn, Emmett & Edmonds JJ); Australian Skills Quality Authority v Brighton Pacific Pty Ltd [2020] FCA 617, [40]-[48] (per Collier J).

Subsection 334(1) of the SIS Act allows a person who is affected by a reviewable decision of the Regulator to request the Regulator to reconsider the decision. The review powers of the Regulator are set out in s 334(4) of that Act. The Regulator, on reconsidering the decision, may confirm, revoke or vary the decision in such manner as the Regulator thinks fit. The function of the Tribunal is not confined to considering the reasons for the decision of the Regulator as confirmed or varied under subsection 334(4), but extends to making the correct and preferable decision on the material before it.[25]
[25] See Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577; Shi v Migration Agents Registration Authority (2008) 235 CLR 286, 327 (per Kiefel J); Frugtniet v Australian Securities and Investments Commission (2019) 367 ALR 695; [2019] HCA 16, [51] (per Kiefel CJ, Keane & Nettle JJ).

The decision made by the original decision-maker as confirmed was to disqualify the Applicant. The Regulator in his reasons relied on subsection 126A(2) of the SIS Act which provides that the Regulator, the Commissioner, may disqualify individuals where there has been contravention of the Act and the other preconditions of that provision are met. Another basis for the decision to disqualify, which it was open to Commissioner to consider, was whether the Applicant was otherwise a fit and proper person under s 126A(3) of the Act. Consequently, it is open to the Tribunal to consider whether under s 126A(3) of the SIS Act the decision under review should be affirmed.
The words “fit and proper”, as they apply in relation to persons holding vocations or offices, were considered by the High Court in the well-known case of Hughes and Vale Pty Ltd v State of NSW: [26]
“But their very purpose is to give the widest scope for judgment and indeed for rejection. “Fit” (or “idoneus”) with respect to an office is said to involve three things, honesty knowledge and ability: “honesty to execute it truly, without malice affection or partiality; knowledge to know what he ought duly to do; and ability as well in estate as in body, that he may intend and execute his office, when need is, diligently, and not for impotency or poverty neglect it”—Coke.”
[26] (1955) 93 CLR 127, 156.

In Australian Broadcasting Tribunal v Bond,[27] Toohey and Gaudron JJ said:[28]
“The expression “fit and proper person”, standing alone, carries no precise meaning. It takes its meaning from its context, from the activities in which the person is or will be engaged and the ends to be served by those activities. The concept of “fit and proper” cannot be entirely divorced from the conduct of the person who is or will be engaging in those activities. However, depending on the nature of the activities, the question may be whether improper conduct has occurred, whether it is likely to occur, whether it can be assumed that it will not occur, or whether the general community will have confidence that it will not occur. The list is not exhaustive but it does indicate that, in certain contexts, character (because it provides indication of likely future conduct) or reputation (because it provides indication of public perception as to likely future conduct) may be sufficient to ground a finding that a person is not fit and proper to undertake the activities in question.”
[27] (1990) 170 CLR 321.
[28] Ibid, page 380.
Section 126A(3) of the Act is not concerned with particular acts or omissions, in the way that s 126A(2) is concerned with particular contraventions by the corporate trustee. The Applicant’s integrity and fitness, as conveyed by the contraventions under s 126A(2) are relevant to the assessment, but other evidence which sheds light on the presence or absence of the necessary characteristics is also relevant.[29]
[29] Shi v Migration Agents Registration Authority (2008) 235 CLR 286, 330 (per Kiefel J); Davies v Australian Securities Commission [1995] FCA 1496, [52] (per Hill J).
The Applicant’s role in the multiple contraventions of the SIS Act was not passive. It was accepted that he was responsible for the various acts or omissions. He has not contested the contraventions but he has continued to shift some of the blame to his accountant for “planting the seed” for his conduct. I have rejected that evidence, but moreover, it portrays a refusal by the Applicant to take full responsibility for his own choices and actions, which even on his own account he knew at the time to be wrong. As the Respondent submits, the Applicant in his evidence sought to downplay his own role in the Corporate Trustee’s contraventions or the seriousness of his conduct. He referred to “touching” his super fund,[30] but said that his actions were “unavoidable”.[31] He said that if his accountant had not “planted the seed”, he would not have “used the avenue” of withdrawing the money from the Fund.[32]
[30]    Transcript, page 36, line 23; page 38, line 21; page 39, line 27 and page 59, line 35.
[31]    Transcript, page 61, line 22.
[32]    Transcript, page 36, lines 21-24, page 50, lines 15-18, page 55, lines 18-20, page 58, lines 33-34, and page 114, lines 39-41.
The Applicant withdrew money from the fund not on the basis that he understood it was lawful, but instead on his understanding that: “you might get away with it”, “you might get a wrap and you know you roll the dice”,[33] “it might be a quick fix”,[34] “I mean, you know, get a wrap around the knuckles and we’d - probably reprimanded, but get away with [it]”.[35]
[33]    Transcript, page 36, lines 37-42.
[34]    Transcript, page 37, line 12.
[35]    Transcript, page 56, lines 10-12.
The Applicant, instead of making repayments to the Fund, made personal contributions of $112,978 to a new superannuation fund (the S & A Super Fund) in the 2013 and 2014 tax years. The Applicant bought various luxury items totalling over $35,000 during late 2016, including jewellery for his wife, before entering into bankruptcy in
March 2017. The Fund, as I have said, was wound up in September 2017.
I accept the Respondent’s submission that the Applicant demonstrated by his behaviour that he preferred to take actions that suited his own convenience and comfort, rather than doing what he understood was right. The Applicant has expressed some remorse or contrition for what occurred. However, having seen and heard the Applicant, I am left with the impression that his regret lies in the fact of his disqualification, more than from any acceptance of the wrongfulness of his conduct. I cannot say I am satisfied on the balance of probabilities that the Applicant will not again deviate from the standards required of him as a responsible officer.[36]
[36] Stasos v Tax Agents Board (1990) 21 ATR 974 at 985 (per Hill J).
It is relevant also that from 6 March 2017 and 25 July 2017, while the Applicant’s property was subject to control by a controlling trustee under s 188 of the Bankruptcy Act 1966 (Cth), and consequently he was a disqualified person within s 120(1)(b) of the SIS Act, he continued as a responsible officer of the Corporate Trustee of the Fund (as well as a responsible officer of a corporate trustee of another SMSF).
As alluded to earlier, the Applicant offered to undertake a trustee education course with an eligible provider, to provide an enforceable undertaking to stop the behaviour that led to the contraventions, and put in place strategies to prevent contraventions again.[37] The strategies are not spelt out in detail, but so far as they are, I am not satisfied that they would mitigate the risk of future contraventions if the Applicant were allowed to act as a trustee, investment manager or custodian or as a responsible officer of a corporate trustee of an SMSF in the future. As to the trustee education course, I note the contraventions did not occur because the Applicant was unaware of his obligations. The Applicant submits that he has been through a process of cleaning up his finances, and for this and several other reasons, he does not represent a future compliance risk, but I do not accept that.
[37] T29, page 819 and T30, page 826.
In all the circumstances I am satisfied that the Applicant is not a fit and proper person to be a trustee, investment manager or custodian, or a responsible officer of a body corporate that is a trustee, investment manager or custodian within the meaning of
s 126A(3) of the SIS Act, and for this reason also, should be disqualified.

DECISION

The reviewable decision that the Applicant be disqualified should be affirmed.

I certify that the preceding 80 (eighty) paragraphs are a true copy of the reasons for the decision herein of Deputy President I R Molloy

.............[SGD]...........................................................

Associate

Dated: 9 August 2022

Dates of hearing:	4 & 5 May 2022 & 8 July 2022
Counsel for the Applicant:	Mr Adam Craig
Solicitors for the Applicant:	Mr Philip Diviny (Madgwicks Lawyers)
Counsel for the Respondent:	Ms Fleur Shand
Solicitors for the Respondent:	Mr Wayne Stewart (Australian Taxation Office)