(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.

1. There is no issue with respect to ss 126A(2)(a) and (b) of the Superannuation Act. The Applicant admits the contraventions identified by the Commissioner for the purposes of s 126A(2)(a). The Applicant admits that he was a responsible officer and that s 126A(2)(b) is satisfied. The question for the Tribunal is whether the nature or seriousness of the contraventions, or the number of them, provide grounds for disqualification. If so, having reached the requisite satisfaction, the discretion to disqualify is enlivened. In Commissioner of Taxation v Coronica,[3] Davies J explained that the formation of the required satisfaction is a precondition to the exercise of the statutory power to disqualify: [4]

... it is a mandatory step for the regulator (here the Tribunal standing in the shoes of the Commissioner) to consider whether to form the required states of satisfaction as a statutory condition for the exercise of discretion. As the decision whether to reach the requisite state of satisfaction is a mandatory step, the formation of that state of satisfaction is not only a jurisdictional fact, but it is also a matter that affects the exercise of the discretion having regard to the subject matter, scope and purpose of the power. In the absence of the formation of the requisite states of satisfaction, or if there are errors in the process by which those states of satisfaction were reached, the exercise of the discretion under s 126A will have miscarried...

The Sections of the Superannuation Act which were Contravened

1. The Commissioner identified 117 separate withdrawals from the fund,[5] which were mostly used by the Applicant to pay mortgages over the family home and two other investment properties. The withdrawals were made from 30 June 2017 to 14 June 2023 and totalled $121,834.92.[6] The Applicant accepts that the withdrawals amounted to 117 separate contraventions involving the following provisions of the Superannuation Act.
2. Section 65 of the Superannuation Act addresses the conferral of impermissible financial assistance on members and their relatives:

Lending to members of regulated superannuation fund prohibited

Prohibition

(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.

Note: Section 166 imposes an administrative penalty for a contravention of subsection (1) by a trustee in relation to a self managed superannuation fund.

1. Section 34(1) of the Superannuation Act provides:

(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.

1. Part 7 of the Superannuation Act sets out special rules that apply only to regulated superannuation funds such as a self-managed super fund. Subsection 62(1) of the Superannuation Act relevantly provides:

(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);

(b) for one or more of the core purposes and for one or more of the following purposes (the ancillary purposes):

(i) the provision of benefits for each member of the fund on or after the termination of the member's employment with an employer who had, or any of whose associates had, at any time, contributed to the fund in relation to the member;

1. Section 84 of the Superannuation 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...

(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.

1. Any investment made with the assets of a fund must be made on a commercial, arm's length basis. The relevant section of the Superannuation 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

(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.

1. Failing to lodge annual returns within the relevant reporting periods is a breach of 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.

(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.

1. As required by the Superannuation Act, the Applicant had engaged an independent auditor for reporting purposes. In December 2017, the auditor provided the Applicant with a report advising of a contravention of s 65 to the value of $5,160.[7] The contravention was noted as not being fully rectified but with a plan to do so. The next auditor report was not received until 14 April 2021 because the Applicant had failed to lodge annual reports as required by the Superannuation Act. The report advised of a contravention of s 65 to the value of $16,345 in 2018 which was noted as not fully rectified with no plan to do so.[8] There were further auditor reports for each year from 2019 to 2022 which recorded contraventions of s 65 which had not been fully rectified but with a plan to do so.[9]
2. In addition to the auditor reports, the Applicant received letters from the auditors advising of breaches of s 65 of the Superannuation Act. In a letter dated 27 May 2021,[10] the auditor advised of an outstanding balance of $45,814 which had increased due to a number of withdrawals in 2019, and which was a breach of s 65. There was a similar letter dated 28 June 2021 noting an increased balance of $69,174 due to withdrawals in 2020.[11] Two days later on 30 June 2021 the Applicant attended the annual general meeting for the trustee the minutes of which falsely record that the fund had complied with the requirements of the Superannuation Act.[12] The Applicant explained during his evidence that that statement was made in order to enable the annual report to be lodged. On 16 March 2022, there was a further letter noting an increased balance of $75,704 due to withdrawals in 2021.[13]
3. On 4 January 2023, the auditor wrote again to the Applicant advising of an increased balance of $77,937 due to withdrawals in 2022 but adding that the trustee has advised that there is a plan in place to correct the breach by repaying amounts outstanding by the end of 2023.[14] The Applicant explained that he was not able to do so because planned property sales did not proceed.
4. On 24 November 2023, the Commissioner advised the Applicant that the fund had been selected for an audit and requested information and documents which were duly supplied.[15]
5. On 8 January 2024, the auditor provided its report for 2023 advising of contraventions of ss 65 and 62 and noting a balance of $103,399 outstanding as of 30 June 2023, which had increased from $77,938 due to a number of withdrawals partially offset by some repayments during the 2023 year.[16]
6. On 29 February 2024, the Commissioner advised the Applicant that he may be disqualified for reasons explained in a position paper.[17] The stated position of the Commissioner was that the Applicant will be disqualified under s 126A(2) because he posed a future risk to compliance within the superannuation system. The Commissioner noted that the amount owing to the fund after the last repayment of $750 on 27 July 2023 was $102,648.92. Particulars of all contraventions were provided.
7. On 19 March 2024, the Applicant responded to the notice of intended disqualification and the position paper by acknowledging and accepting "all contraventions outlined in the correspondence received" and imploring "for leniency and the opportunity to rectify my errors."[18] The Applicant explained that the withdrawn funds were a loan from the fund to be repaid along with interest. He said he had already repaid $14,050 to the fund and that the remaining balance would be repaid by the end of May 2024.[19]
8. On 5 April 2024, the Commissioner disqualified the applicant from acting as a responsible officer for the fund.[20] Reasons were provided.
9. On 31 May 2024, the Applicant advised that the outstanding balance had been paid to the fund.[21]
10. On 20 June 2024, the Commissioner affirmed the disqualification decision after having received a request for review from the Applicant.[22]

Consideration of the Nature and Seriousness of the Contraventions

1. The first issue is whether I am satisfied that the nature or seriousness of the contraventions, or the number of them, provides grounds for the disqualification of the Applicant. I turn now to consider this issue.
2. The contraventions involved 117 withdrawals from the fund. The Applicant made the withdrawals because he was struggling financially and needed money to pay his mortgages and to complete business deals. He had fallen into financial hardship in 2017 after losing money on investments. He could not meet his mortgage repayments and used the fund as a "safety net" so as to keep a house over his head. His financial problems were exacerbated by COVID in 2020 and 2021.
3. The Applicant said that he read and signed the trust deed but did not take any advice at the time of setting up the self-managed super fund in 2014. He said that he read clause 65 which was entitled "Forbidden investments" and which prohibited loans to a member. He said that he ignored clause 65 and did not take notice of it because of his financial hardship.
4. I find that the Applicant, despite not taking advice, did understand that what he was doing was in breach of clause 65 and was a contravention of his obligations in the Superannuation Act. The Applicant is an educated person who obtained tertiary qualifications as an accountant in 2011. Further, he obtained a financial services licence in 2015. Whilst not directly related to superannuation, these qualifications in accountancy and financial services would have given the Applicant a better than average understanding of the legal implications of what he was doing. Despite that understanding, he continued to draw down funds on a regular basis over a period of six years. Further, he continued despite receiving professional advice from an auditor that what he was doing was a contravention of s 65 of the Superannuation Act. He first received that advice on or around 21 December 2017.
5. 117 contraventions of s 65 is a very significant number of contraventions. They were frequent and over a long period of time. The contraventions were deliberately made with the knowledge that they were in breach of the trust deed and contrary to obligations in the Superannuation Act. They persisted despite written notice from an independent auditor that what he was doing was against the law. It is remarkable that despite this clear and repeated advice from an expert in superannuation he continued to contravene. By continuing to frequently access the fund for his own purposes, the Applicant showed a contumelious disregard for the law. The level of indebtedness to the fund increased in every year from 2017 to 2023. There appears to have been no genuine effort to significantly reduce the outstanding balance of loans until after the Commissioner's intervention with the audit beginning in November 2023. The Applicant's banking records show that the majority of the debt (about $87,750) was not paid until after the disqualification on 5 April 2024.
6. The loan amount as a percentage of the total assets of the fund exceeded 5% from 18 July 2018 through to 30 June 2023. This represents a failure to comply with s 83(2) of the Superannuation Act on 97 occasions as further loans were made to the Applicant. Further it represents a breach of s 84(1) which is a civil penalty provision. These contraventions are significant in terms of number and seriousness.
7. By accessing the fund to pay mortgages, the Applicant contravened the sole purpose requirement in s 62 which requires the fund to be maintained solely for the benefit of members in their retirement. In this case, the fund's assets were used to provide a present-day benefit to the Applicant as a member of the fund. This is a breach of a civil penalty provision and is a very serious contravention.
8. The loans from the fund were contrary to s 109 which requires that investments are to be made and maintained on an arm's length basis. A loan to the director of the corporate trustee of the fund with no proper documentation or terms and repeated sporadically over a long period is not an arm's length investment, nor was it maintained on an arm's length basis.
9. There were contraventions of s 35D(1) because annual returns were lodged late for the 2015, 2018, 2019 and 2020 financial years. Non-compliance of this nature in a self-assessment system is very serious. The timely lodgement of annual returns is a fundamental requirement of the regulatory regime and is particularly important when there are actual contraventions which may go undetected if annual returns are not lodged.
10. The cumulative effect of the contraventions is apparent from the number of separate provisions of the Superannuation Act which were contravened together with the significant number of separate contraventions of each of those provisions. Contraventions were deliberately made and were repeated frequently over an extended period. I am satisfied in terms of s 126A(2)(c) that there are very strong grounds for the Applicant's disqualification.

1. Having reached the state of satisfaction required by s 126A(2), I turn now to consider whether to exercise my discretion to disqualify the Applicant.
2. Disqualification under section 126A is primarily aimed at protecting the integrity of the superannuation system. A key factor in making the decision to disqualify is whether the Applicant presents as a future compliance risk.
3. The question of determining whether the applicant presents as a future compliance risk involves a forward-looking process to evaluate the risk of the applicant engaging in contraventions of the Superannuation Act in the future. In Minister for Immigration & Ethnic Affairs v Guo,[23] Brennan CJ, Dawson, Toohey, Gaudron, McHugh and Gummow JJ observed as follows:

The course of the future is not predictable, but the degree of probability that an event will occur is often, perhaps usually, assessable. Past events are not a certain guide to the future, but in many areas of life proof that events have occurred often provides a reliable basis for determining the probability - high or low - of their recurrence. The extent to which past events are a guide to the future depends on the degree of probability that they have occurred, the regularity with which and the conditions under which they have or probably have occurred and the likelihood that the introduction of new or other events may distort the cycle of regularity. In many cases, when the past has been evaluated, the probability that an event will occur may border on certainty. In other cases, the probability that an event will occur may be so low that, for practical purposes, it can be safely disregarded. In between these extremes, there are varying degrees of probability as to whether an event will or will not occur. But unless a person or tribunal attempts to determine what is likely to occur in the future in relation to a relevant field of inquiry, that person or tribunal has no rational basis for determining the chance of an event in that field occurring in the future.

4. In Assistant Minister for Immigration and Border Protection v Splendido,[24] Mortimer J said:

[77] The bare recitation of what a person has done in the past, if used as a basis for a positive finding about what she or he may do in the future, is a reasoning process which is rejected by the judicial process in relation to fact-finding about legal responsibility for past events. More than the bare recitation of the past offending is required, and what is required for such evidence to be considered is strictly controlled by reference to the nature and circumstances of the offending, ...

[78] The nature and circumstances of past offending are integral to any assessment of the risk, or likelihood, of future offending. Also of relevance are a range of other factors about the present circumstances of an individual which may bear on a risk of whether past offending conduct might or might not be repeated. It is these matters, and not the mere specification of a criminal record, which provide the probative basis for an assessment about the nature and extent of any risk of further offending.

1. I have made comprehensive findings about the nature and circumstances of the Applicant's past contraventions. These findings are "integral to any assessment of the risk, or likelihood, of future" contraventions.[25] The Applicant's past conduct shows that when he was struggling financially he was prepared to contravene very clear obligations so as to improve his financial position. The contraventions were very serious and were repeated over a lengthy period despite independent advice that he was breaching the law. It appears that the Applicant was willing to continue to contravene until the regulator stepped in. The contraventions only stopped when the Commissioner intervened and commenced an audit. There is no doubt that these contraventions occurred and that he was solely responsible for them. He knew that he was using the fund for a prohibited purpose. He sought to minimise the seriousness of his conduct by explaining that his intention was always to repay the money to the fund. It is telling that he only repaid the debt after the audit by the Commissioner and after receipt of the Commissioner's position paper which advised of an intention to disqualify him. In terms of assessing future compliance risk, I give very significant weight to the seriousness, number and long period of the past contraventions. The nature and seriousness of the past contraventions indicate that the Applicant is likely to contravene again. This is a factor that weighs heavily in favour of disqualifying the Applicant.
2. As for the countervailing factors, the Applicant takes full responsibility for the contraventions identified by the Commissioner. He said that by speaking to professionals and undertaking online courses he now has a better understanding of the obligations under the Superannuation Act and that he would never engage in contraventions in the future. He says that by repaying all of the money that was loaned out from the fund and by cooperating with the audit, he has demonstrated a commitment to properly maintaining the fund in the future. He says that he has put measures in place, and consulted with legal and financial advisors, to ensure that the fund operates for its intended purpose. Under cross examination, the Applicant explained that he met with a financial advisor and that his financial situation has improved so that he can pay his mortgage from his own income. He said that met with lawyers in December 2024 and earlier this year and he now understands the errors that he made. I take all of these factors into account.
3. The Applicant's lawyer and accountant have both written to the Tribunal confirming that the Applicant understands "the error of his mistake" and is fully aware of his responsibilities in relation to the fund. The accountant's letter sets out details of the commitments undertaken to ensure future compliance. This includes appointing suitably qualified and independent professionals to provide compliance advice with respect to the fund. It reflects well on the Applicant that he has sought appropriate advice from professionals and that he will continue to do so in the future if he remains a responsible officer for the fund.
4. Under cross examination, the Applicant clarified that whilst he has been doing some online training in relation to superannuation, he has not completed any courses or obtained qualifications related to superannuation. He explained that he intends engaging in appropriate courses after dealing with this application. He said that he has reached out to the relevant organisations and will enrol in a three-month superannuation course. He said that he has gained some relevant experience in his current employment which includes responsibilities for his employer's super fund.
5. The Applicant has made many general statements that he now has a better understanding of his legal and compliance obligations with respect to the fund. However, I was not very impressed by the evidence he presented to support this general assertion. The Applicant appears to have received some limited advice from lawyers and accountants, but no details have been provided of the time spent with them or what they taught him. The letters dated 24 December 2024 focus more on the future and do not explain what the professionals have done and how the Applicant has improved his knowledge in relation to superannuation. Further, the Applicant gave no particulars of his online training and admitted that he has not yet engaged in any courses relevant to superannuation. Whilst I accept that the Applicant has demonstrated some commitment to improved practices in the future, in my view, the Applicant has not demonstrated that he has materially improved his understanding of superannuation principles. This is a concern given the significant extent and seriousness of his past contraventions and that the Applicant used his lack of understanding to explain under cross examination why he made those contraventions. For example, when asked about some of the particular withdrawals he made from the fund, he said that he would not have done it if he had a "full understanding".
6. The fact that the Applicant only sought professional advice and assistance relatively recently (from December 2024) and that it was of a limited nature indicates that the Applicant is not genuine about reducing the risk of compliance breaches in the future.
7. It concerns me that the Applicant asserts an improved understanding without having any genuine grounds for doing so. This suggests a lack of insight into what he needs to do avoid further contraventions in the future. Further, there were numerous statements by the Applicant in his written statement of position that indicate a lack of insight as to the seriousness of the contraventions. For example, the Applicant described his actions as "inadvertent" and said that he did not believe that the contraventions affected the fund's assets or exposed the fund to risk. Further, he said that the contraventions were the result of honest and reasonable mistakes. The Applicant resiled from these comments when I pointed out to him that they did not seem consistent with his oral evidence, but it remains a concern that he made them, given that his contraventions were deliberate and continued despite the advice he received that the withdrawals were in breach of the Superannuation Act.
8. The Applicant pleads for a second chance because disqualification will significantly impact his ability to act as an accountant and in other business affairs resulting in a loss of income that would adversely affect his family. He also said that if not disqualified he intends to expand his accounting practice so as to give advice in relation to superannuation. I take into account the particular financial impact on the Applicant as an accountant, businessman and the holder of a casino licence if he is disqualified. It would impact his reputation as an accountant and businessman and likely have a financial impact on him, but the key factor for me when exercising my discretion is protecting the integrity of the superannuation system which includes protecting the investing public.
9. In conclusion as to whether to exercise my discretion to disqualify the Applicant, I consider that the Applicant presents an ongoing risk of non-compliance with the Superannuation Act. In assessing that risk, I take into account that the past contraventions were serious and repeated over a six-year period despite independent advice of his wrongdoing. Further, the Applicant has not demonstrated appropriate insight into the seriousness of his past offending and has taken inadequate steps towards improving his understanding of superannuation principles. If the Applicant was genuinely committed to reducing the risk of future non-compliance, he would have completed courses or provided other evidence of an improved understanding in the field of superannuation. Given the Applicant's past conduct, it is not enough for the Applicant to say he will complete appropriate courses in the future.
10. I take into account that the Applicant is not currently under any financial stress which reduces the likelihood of further contraventions, but the Applicant's financial situation may deteriorate (as it did in the past) and his past conduct indicates that there is a real risk that he would turn again to the fund to alleviate his situation. If he were to repeat his past contraventions to the same extent, then the consequences for the fund would be significant.
11. The applicant says that the disqualification "is for life" but I do note that under s 126A(5) the Commissioner may revoke a disqualification. The applicant could apply for a revocation in the future perhaps at a time when he has completed appropriate courses and education to reduce his risk of future non-compliance. Nevertheless, I do accept that the disqualification is not for a limited period and will impact his ability to earn income in the future.
12. The Applicant has proposed an undertaking to undergo yearly or quarterly audits to ensure future compliance, but this would be insufficient given the seriousness of past contraventions and that the Applicant ignored the repeated advice of the independent auditor in the past. The Applicant has not offered to appoint an independent person and to step aside from his role as director or responsible officer.
13. Consequently, I would exercise the discretion to disqualify the Applicant under s 126A(2).

1. The decision of the Tribunal is to affirm the decision under review.

I certify that the preceding 50 (fifty) paragraphs are a true copy of the reasons for the decision herein of Deputy President Britten-Jones.

................[sgd]........................................................

[2] All references to legislation are to the Superannuation Act unless otherwise stated.

[3] [2022] FCA 72.

[4] Ibid [15]. Davies J was considering ss 126A(1) and (3) of the Superannuation Act which are structured in a similar way to s 126A(2).

[23] [1997] HCA 22; (1997) 191 CLR 559 at 574-5.

[24] [2019] FCAFC 132.