Administrative Appeals Tribunal Overturns Tax Commissioner’s Decision on Superannuation Trustee Disqualification

The Administrative Appeals Tribunal has made a significant decision to set aside the Commissioner of Taxation’s ruling to disqualify an applicant from acting as a trustee or responsible officer of a corporate trustee of a superannuation entity. This decision, which involved Gordon Merchant, the founder of Billabong, has sparked discussions within the financial and legal communities.

The case, known as Merchant and Commissioner of Taxation [2024] AATA 1102, was part of a series of cases that have been closely watched by industry experts. It follows a recent Federal Court decision that examined whether Merchant had engaged in an asset wash sale by selling Billabong shares to his SMSF to capitalize a capital loss.

Matthew Burgess, the director of View Legal, commented on the Tribunal’s decision, explaining that while there were clear breaches of the Superannuation (Industry) Supervision Act (SISA) by the SMSF, the AAT determined that Gordon Merchant should not be disqualified. The disqualification was triggered by a decision of the SMSF to acquire a substantial number of shares in Billabong from a discretionary trust controlled by the fund member to crystallize a significant capital loss.

Despite the serious breaches of the SISA, the Tribunal found that the risk of future non-compliance was unlikely and therefore decided to set aside the disqualification. The Tribunal noted that the breaches all arose from the same course of conduct and that Merchant’s advisers did not suggest that the transaction would breach the SISA.

Justice Thomas Thawley, deputy president of the AAT, stated that Mr. Merchant is only likely to be a director of the trustee of his own superannuation fund and does not need protection from himself. The Tribunal also highlighted that the Tax Office itself had concluded that Gordon Merchant was a fit and proper person.

In conclusion, the Tribunal’s decision in this case has raised important considerations about disqualification in unique circumstances and the need for protection against future non-compliance. The ruling has implications for the superannuation industry and sets a precedent for similar cases in the future.