The AAT has set aside a notice of non-compliance issued to the trustees of a self-managed superannuation fund by the Commissioner under s 40 of the Superannuation Industry (Supervision) Act 1993 (the SIS Act).
The Commissioner based his decision on the fact that the trustees of the fund had contravened ss 62, 83, 84 and 109 of the SIS Act and, in particular, the in-house assets rules in ss 83 and 84. The trustees made a loan to a related company which represented more than 5% of the value of the fund.
The trustees argued that the Commissioner should have exercised his discretion under s 42A(5) of the SIS Act to declare the fund complying notwithstanding the contraventions of the SIS Act.
The AAT noted:
"There are three factors to be considered under s 42A(5) of the SIS Act and PS LA 2006/19 provides guidelines to the decision-maker on each of these factors. In my view, PS LA 2006/19 is consistent with the objects of the SIS Act, as further explained by Logan J [in in Vivian (Deputy Commissioner of Taxation (Superannuation)) v Fitzgeralds & Anor (2007) 69 ATR 834;  FCA 1602], and should be followed."
The AAT considered each of the three consequences in s 42A(5), namely, the taxation consequences that will arise if the entity were to be treated as a non-complying superannuation fund, the seriousness of the contravention or contraventions; and all other relevant circumstances. The AAT concluded:
"This case is finely balanced. The contraventions were serious and [the trustees] failed to discharge their duties to rectify the breach in a timely manner. Against this, [the trustees] caused [ther related company] to repay the Fund, albeit later than promised, and the tax consequences on the Fund, and hence their retirement savings, are significant...In the circumstances of this case and weighing up all the factors, I am satisfied that it would not be inconsistent with the objects of the SIS Act to exercise the discretion in favour of the Fund in respect of the year ended 30 June 2006, notwithstanding the breach of certain regulatory provisions of the SIS Act. I therefore set aside the decision under review, being the decision to issue the notice if non-compliance. Under s 45(3) of the SIS Act, the notice is “taken never to have been given” and as such the Fund remains a complying superannuation fund."
Pabian Park Pty Ltd Superannuation Benefits Fund and FCT  AATA 375 (21 June 2012)