In the case of Fitzmaurice and Commissioner of Taxation, the trustee, Louise Fitzmaurice, sought a review of the ATO’s decision to disqualify her following contraventions of the SIS Act by lending money to a member, early release of benefits where the member did not satisfy a condition of release, failing to maintain investments at arm’s length, failing to lodge annual returns and failing to keep an up-to-date market valuation of the major asset of the fund.
Ms Fitzmaurice argued she and her husband had relied on advice from their accountant in committing the breaches, specifically that they had accessed funds from their SMSF following a house fire after their accountant had informed them they may be able to do so under hardship provisions.
However, the tribunal found Ms Fitzmaurice was “imprudent” to rely on such advice from her accountant, given it was vague in nature and was given over the phone rather than in writing.
It also transpired in the case that the accountant had queried the nature of transactions the funds were used for, including to purchase clothes and a car for Ms Fitzmaurice’s daughter.
Ms Fitzmaurice also argued the couple had relied on advice from their accountant in committing several of the other breaches and had expected they would be informed of any obligations on their part.
However, she could not produce any specific evidence that it was the accountant’s responsibility within the couple’s service agreement to inform them of such obligations, and the tribunal found that responsibility for maintaining compliance with the SIS Act and the SMSF deed primarily lay with the trustee rather than their advisers.
Commenting on the significance of the case, DBA Lawyers director Daniel Butler said accountants could leave themselves open to legal action if they did not make clear to clients the distinction between formal and informal advice.
“The decision reinforces that advisers need to be very careful in providing advice. Even if [it] is qualified along the lines that ‘it might be possible subject to certain criteria’, clients may act on that advice to their detriment and seek to rope in the adviser [to legal proceedings],” Mr Butler said.
“The best method of an adviser minimising risk is to provide clear written confirmation of any communication which may need a disclaimer.”
However, Mr Butler warned that diligence would not necessarily save SMSF professionals from this type of predicament.
“Even for prudent advisers who follow best practice behaviour of consistently documenting each communication, there is always the vexatious litigant who will seek to instigate legal proceedings in the hope that an out-of-court settlement may be reached on a commercial basis that it’s cheaper to pay them out than to proceed any further,” he said.