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Trustee obligations of a disqualified person

There are ramifications when a trustee in a self managed super fund (SMSF) becomes a disqualified person.

An individual can become a disqualified person if any of the following conditions apply. If they:

-have been convicted of an offence involving dishonesty

-have been subject to a civil penalty order under the super laws

-are insolvent under administration

-have been disqualified by a court or regulator

A company is a disqualified person if any of the following conditions apply:

-a responsible officer of the company (such as a director, secretary, or executive officer) is a disqualified person

-a receiver, official manager, or provisional liquidator has been appointed to the company

-action has been taken to wind up the company

Under superannuation laws, if an individual becomes a disqualified person they must notify the ATO immediately of their disqualification- unless they were disqualified by the ATO- and cease being, or acting as, a trustee.

It is an offence for a disqualified person, who is aware of their status of being disqualified, to continue to be, and act, as a trustee of the SMSF.  Penalties for this can include fines and in some cases, imprisonment.

To determine whether a disqualified person can again become an individual trustee of a SMSF depends on how they were made disqualified:

Convicted of an offence involving dishonesty

An individual may apply for a declaration waiving their disqualified status within 14 days of the date of their conviction, and only if the penalty or prison term is less than stated in the legislation

Insolvent under administration

Once the individual is no longer insolvent under administration they are no longer a disqualified person

Disqualified by a court or regulator

Legislation sets out the circumstances in which an individual can request their disqualification to be revoked.

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    • Understanding Fringe Benefits Tax (FBT) And What It Covers

    April 15, 2024

    For businesses in Australia, providing fringe benefits to employees can be a valuable way to attract and retain talent, as well as incentivise performance.

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    Let’s explore the types of fringe benefits subject to FBT to help businesses navigate this complex area of taxation.

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    One common type of fringe benefit is the provision of a car for the private use of employees. This includes company cars, cars leased by the employer, or even reimbursing employees for the costs of using their own cars for work-related travel.

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    Employers may provide housing or accommodation to employees as part of their employment package. This can include providing rent-free or discounted accommodation, paying for utilities or maintenance, or providing housing allowances.

    1. Expense Payment Fringe Benefits

    Expense payment fringe benefits arise when an employer reimburses or pays for expenses incurred by an employee, such as entertainment expenses, travel expenses, or professional association fees.

    1. Loan Fringe Benefits

    If an employer provides loans to employees at low or no interest rates, the difference between the interest rate charged and the official rate set by the ATO may be considered a fringe benefit and subject to FBT.

    1. Property Fringe Benefits

    Providing employees with property, such as goods or assets, can also result in fringe benefits. This can include items such as computers, phones, or other equipment provided for personal use.

    1. Living Away From Home Allowance (LAFHA)

    When employers provide allowances to employees who need to live away from their usual residence for work purposes, such as for temporary work assignments or relocations, these allowances may be subject to FBT.

    1. Entertainment Fringe Benefits

    Entertainment fringe benefits arise when employers provide entertainment or recreation to employees or their associates. This can include meals, tickets to events, holidays, or other leisure activities.

    1. Residual Fringe Benefits

    Residual fringe benefits encompass any employee benefits that do not fall into one of the categories outlined above. This can include many miscellaneous benefits, such as gym memberships, childcare assistance, or gift vouchers.

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    Employers must understand their FBT obligations and ensure compliance with relevant legislation and regulations. This includes accurately identifying and valuing fringe benefits, keeping detailed records, lodging FBT returns on time, and paying any FBT liability by the due date.

    Fringe Benefits Tax (FBT) is an essential consideration for businesses that provide non-cash benefits to employees.

    By understanding the types of fringe benefits subject to FBT, employers can ensure compliance with tax obligations and avoid potential penalties or liabilities.

    Seeking professional advice from tax experts or consultants can also help businesses navigate the complexities of FBT and develop strategies to minimise tax exposure while maximising the value of employee benefits. Why not start a conversation with one of our trusted tax advisers today?