Coronica — an update

In May 2021, we published two articles on the AAT decisions concerning Mr Coronica and his SMSF:

• The dangers of maintaining a suspense account in an SMSF
• Good governance and SMSFs

As reported in the second article, the AAT set aside the decision of the Commissioner to disqualify Mr Coronica from being an SMSF trustee.  This was despite the AAT upholding the decision of the Commissioner to make the SMSF, of which Mr Coronica was a trustee, non-complying.

A key reasoning for the AAT's decision to allow Mr Coronica to continue as a trustee was "the Tribunal is of the opinion that with appropriate enforceable undertakings which include a commitment to adopting appropriate governance arrangements, Mr Coronica is highly likely to comply going forward."  The AAT's decision set out the enforceable undertakings and governance arrangements which were to apply.

We can now report that the ATO has successfully appealed in the Federal Court of Australia the AAT's decision to allow Mr Coronica to remain as an SMSF trustee. In coming to this decision, the Federal Court found the AAT should have focussed on the statutory questions posed by section 126A of the Superannuation Industry (Supervision) Act 1993. Instead, the AAT had focussed more on "the various countervailing matters, which were considered by the tribunal to weigh upon whether disqualification was “appropriate". 

The Federal Court also ruled that the AAT fell into error by considering the financial consequences of the SMSF becoming non-complying as a penalty relevant to the disqualification decision on Mr Coronica.  The impact of the non-compliance tax outcome should not have been a factor when considering if Mr Coronica is a fit and proper person to continue to act as a trustee of an SMSF.

It appears the ATO chose to appeal the AAT decision to the Federal Court because it had a strong view that the actions of Mr Coronica did not meet their expectations of the actions of a fit and proper SMSF trustee.  If they had not appealed the AAT decision it would have been more difficult for them to disqualify trustees in the future.  Now, they have a set of behaviours and actions which they can use as a fit and proper person benchmark and all trustees should be on notice to ensure they do not make the same mistakes as Mr Coronica did.

For truly independent auditor advice, please give Baumgartner Super a call on 1300 04 SMSF (1300 047 673) Australia-wide to learn more about our audit services.