In this case the Federal Court imposed fines of $20 000 for each SMSF trustee for breaches of the superannuation law involving loans to themselves as fund members. The husband and wife respondents were the trustees/ members of a family SMSF. Over a 3 year period from June 2009 to June 2012, the SMSF made 68 loans to the couple totaling just over $200 000. These loans were unsecured , no interest was charged, and no repayment terms were in place. All up, only just over $28 000 was repaid. The borrowed money was used by the couple to service a line of credit in relation to their unsuccessful investment in a dry-cleaning business.
In August 2012, the SMSF's auditor lodged auditor contravention reports for the relevant years. The ATO applied to the Federal Court to impose civil penalties for breaches of:
- The sole purpose test
- Financial assistance to members
- The in-house asset rules, and
- The arm's length dealing requirements
While a maximum civil penalty up to 2000 penalty units could apply for each contravention under the Superannuation Industry Supervision Act (i.e. $220 000 at the relevant time), the court imposed a penalty of $20 000 for each trustee of the SMSF to be paid over a 3 year period with monthly repayments of $556. The court agreed that the contraventions were "serious" as they involved deliberate breaches over a 3 year period and had reduced the assets of the fund to only $6000.
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