Q I have been told that I should appoint one of my children to act as a Trustee of my SMSF. My daughter has a criminal record related to shoplifting. It was a long time ago and she has had no subsequent convictions. Would this pose a problem in her being appointed as a Trustee?
A The SIS Act prohibits “disqualified persons” from acting as Trustees of SMSF’s. A disqualified person is an individual who has been convicted of an offence involving dishonest conduct. Without getting into the technical legal definition of dishonest, the courts have generally found a person is considered dishonest if actions are done that will produce an adverse outcome to others. Common examples of dishonest conduct would include theft, fraud and dealing in illegal substances.
Shoplifting is included as an example of a conviction that would disqualify a person from being eligible to act as a Trustee. So in your daughter’s case , you have a problem.
Convictions in Australia or in another countries are included under the Act.
If a disqualified person acts as a Trustee of an SMSF, the SIS Act provides a range of penalties; penalties range from fines from $10,200 up to two years in prison. The penalties apply if the Trustee was a appointed as a disqualified person or subsequently becomes a disqualified person whilst acting as a Trustee.
On identifying a breach, Trustees are obligated to immediately inform the ATO or face a penalty of $8,500.
If the conviction is minor and or from a long time ago, the disqualified person may apply to the ATO or the Federal Court for a waiver. In your daughter’s case, she could apply for a waiver depending on how long ago the offence was committed and what severity of the penalty imposed by the court.