Case 1:
In this case the member wished to be compensated for loss suffered when he relied on incorrect advice from the former trustee. It was the current trustee’s decision to not compensate that was being reviewed by the Tribunal.
In his early fifties the member commenced planning for a post working life business venture and this involved buying rural land which already had an established business on it. In consultation with his accountants and legal advisers, he devised a financial strategy which involved his defined benefit withdrawal amount being transferred to a self-managed fund. He made enquiries, on several occasions, from the former trustee about transferring this benefit and the trustee advised that the rollover was possible when, actually, it was only permitted with the prior consent of the employer when there was no termination of employment involved. The member wished to work until 55 years of age.
When it became clear the member was not going to be able to transfer monies to the self-managed fund he took steps to ensure the sale of the rural land and business proceeded, but alleged this caused significant disruption and financial loss to himself, his partner and associated entities.
It was not in dispute the former trustee’s advice was incorrect. What was in dispute was the information that the member had provided the current trustee and whether that was adequate for the trustee to make a proper decision about compensation.
In letters to the member the trustee detailed the information it needed to access the claim. The key areas were:
- Identification of the steps the member took to mitigate his losses once he was aware of the rules about transferring a defined benefit while still working for the employer;
- Clarification of the extent to which the various financial transactions could be considered a consequence of the false information provided by the former trustee; and
- Substantiation of his losses.
While the member did provide a significant amount of information, including tax returns, sale documents and calculations of losses he claimed were caused by him ceasing employment, the Tribunal held that the information provided did not address the fundamental issues noted above.
The Tribunal also considered that even if the member did not take steps to mitigate his loss, the trustee was still ‘entitled to be provided with the financial impact of other avenues which may have been open to’ him as opposed to ceasing employment altogether. This was especially so given the member had indicated that the purchase of the land and business was ‘an opportunity not to be missed’. The trustee was entitled to be convinced that the actions taken by the member were as a ‘direct result of the incorrect information provided’ by the former trustee and that the member ‘would not have proceeded as he did if the trustee had provided correct information at the outset’. Accordingly, the Tribunal affirmed the trustee’s decision to not pay compensation.
D17-18 96
Case 2:
In this case the Tribunal was reviewing the trustee’s decision to not pay compensation to the member’s United Kingdom pension fund for losses caused by foreign exchange rate transactions.
In this case the Tribunal was reviewing the trustee’s decision to not pay compensation to the member’s United Kingdom pension fund for losses caused by foreign exchange rate transactions.
The member wished to transfer his UK pension fund account balance to his Australian super fund. The trustee received an application for this transfer to take place in mid-April 2015, and in mid-June 2015, the fund banked a cheque for GBP£105,787. This amount converted to an Australian dollars amount of $210,731.08.
Between the date the member applied to transfer funds from the United Kingdom to Australia and the receipt of those monies in Australia, the laws in the United Kingdom changed. This caused the trustee to write to the UK pension fund on 25 June 2015, saying:
“Following changes in the QROPS regulation effective 6 April 2015 we are working with the Australian government to seek urgent clarification from the United Kingdom regarding Australian QROPS funds’ ability to comply with the new legislation.
Due to the potential tax consequences for the member if UK authorities determine that the Plan does not meet the new QROPS requirements, we have suspended acceptance of UK transfers until the matter is resolved. Therefore, please find enclosed a refund cheque for £105,787.00 made payable to [the UK Pension Fund]”.
When the UK pension fund converted the Australian dollar amount it received back to British pounds there was a shortfall from the original transfer amount of GBP£8,637.69. The UK pension fund asked the Australian trustee to pay this amount to it. This was effectively the resolution being sought by the member.
Subsequent to returning the money to the UK, the trustee was advised it was no longer able to accept UK transfers and the changed law was effective 6 April. However, at the time the trustee spoke to the member in April about the transfer it honestly believed it was a Qualifying Recognised Overseas Pension Scheme (QROPS).
The Tribunal held that while the circumstances were unfortunate, the trustee had followed its standard procedure and, at all times, in its communications with the member or the UK pension fund it had acted appropriately on the information it had at that point in time. The foreign exchanges losses were not something to be paid for by the fund. It therefore followed that the decision of the trustee to not pay compensation was fair and reasonable in the circumstances.
D17-18 94
Case 3:
This is a case essentially about the member not being fully informed about technical tax laws. Should the fund pay for his losses?
Two decisions of the trustee were being reviewed by the Tribunal. The first was the decision to not report the member’s non-concessional contribution for the year ended 2014 to the Australian Taxation Office (ATO) as a concessional contribution, thereby denying him a tax deduction. The second decision concerned not compensating the member in relation to a missed tax deduction for the 2015 financial year.
The member had two accounts with the fund. One was an accumulation account and the other a transition to retirement account (TTR account). He had a history of making personal contributions by withdrawing funds from his TTR account and making contributions to his accumulation account. This tax strategy allowed him to claim a tax deduction for the personal contributions.
A key element of the tax strategy involved the member submitting to the trustee a Notice of Intent to claim a tax deduction within the statutory timeframe. The standard procedure was for the fund to then acknowledge receipt of the Notice of Intent. In 2014 these steps did not occur resulting in the member paying tax of $59,376.74.
In the 2015 tax year, the member tried to withdraw $100,000 from his TTR account to be banked and then recontributed to his accumulation account as a personal contribution. The fund mistakenly believed it did not have his bank account details and this caused a delay and a resulting conversation with the fund’s contact centre. That conversation discussed a rollover and the member did not realise that would have different tax consequences from a payment out of the fund and then a recontribution.
The Tribunal held it was not persuaded by the member’s argument that the trustee had an obligation to communicate with him of the need for the Notice of Intent to be submitted within the necessary timeframe set by the tax laws. Similarly, the Tribunal was not convinced that the fund’s contact centre had made representations that were false or reckless. There was also no evidence that the member would have done something else
if the misrepresentation was not made. The Tribunal also noted that the fund’s contact centre was not able to give personal financial advice and, therefore, it was difficult to argue the contact centre staff should have made the detailed enquiries the member’s arguments essentially required. The trustee’s decisions were therefore affirmed as being fair and reasonable in the circumstances.
D17-18 92
