Shaw and Commissioner of Taxation

[2015] AATA 288

(Decision by: Ms A F Cunningham, Senior Member)

Shaw
v.Commissioner of Taxation

Tribunal:
Administrative Appeals Tribunal

Member:
Ms A F Cunningham, Senior Member

Subject References:
Superannuation
self managed superannuation fund
disqualification from acting as trustee for conviction of offences involving dishonesty
application for waiver
whether highly unlikely to be a prudential risk to a superannuation entity
high threshold test not satisfied
decision under review affirmed

Legislative References:
Superannuation Industry (Supervision) Act 1993 - The Act
Superannuation Industry (Supervision) Amendment Act 1995 - The Act

Case References:
The Taxpayer v Commissioner of Taxation - (2002) AATA 1233
VX96A and Insurance and Superannuation Commissioner - (1996) 23 AAR 427

Hearing date: 10 December 2014
Decision date: 1 May 2015

Hobart


Decision by:
Ms A F Cunningham, Senior Member

REASONS FOR DECISION

1. The applicant, Stuart Shaw seeks the review of a decision of the Commissioner of Taxation made on 14 November 2013 confirming an earlier decision not to waive his disqualified status pursuant to section 126D of the Superannuation Industry (Supervision) Act 1993 (SIS Act).

2. Mr Shaw and his wife were the trustees of the S and J Superannuation Fund (The Fund), a self-managed superannuation fund (SMSF) which was established in 2002. On 1 June 2012 Mr Shaw was convicted in the Supreme Court of Tasmania of five counts of conspiracy, contrary to section 297(1)(d) of the Criminal Code Act 1924 (Tasmania). As a result of these convictions for dishonest conduct, Mr Shaw became a disqualified person pursuant to section 120(1)(a)(i) of the SIS Act.

3. Mr Shaw subsequently made an application for waiver of his disqualified status pursuant to section 126B of the SIS Act. This provision provides that if the regulator is satisfied that the applicant is highly unlikely to contravene the SIS Act and do anything that would result in a self -managed superannuation fund not complying with the SIS Act, he must make a declaration waiving the applicant's status as a disqualified person. The issue for the Tribunal to determine is whether the Commissioner should have exercised his discretion to waive the applicant's status as a disqualified person.

4.Both parties were represented by legal counsel at the hearing. Mr Shaw gave oral evidence and was cross-examined. The T documents were tendered pursuant to the provisions of section 37 of the Administrative Appeals Tribunal Act 1975. Two volumes containing statements of findings, material questions of fact, evidence, reasons for decision and relevant documents were also tendered. Following the conclusion of the hearing, the Tribunal invited further submissions regarding the audit requirements of a self- managed superannuation fund and an agreed statement of facts.

BACKGROUND FACTS TO THE CONVICTIONS

5. In October 2003 Mr Shaw was injured in a car accident caused by the negligent driving of another party. As a result of his physical injuries he suffered from depression. Mr Shaw ceased operating his building business in 2007 on account of his physical injuries arising from the accident and after completing a photography diploma, worked as a photographer for a period of time. Due to financial difficulties he ceased this work and in June 2008 commenced working as a contractor for GHD. He was positioned on a large construction project known as the Tamar Valley Power Station which required him to drive along the East Tamar Highway each day. The highway was undergoing major upgrade works which resulted in lengthy delays getting to and from work. It was Mr Shaw's evidence that he was required to work long hours and travel considerable distances to and from work. Work commenced each morning with a coordination meeting at 6 a.m. and Mr Shaw would often work until 5 p.m. for six and sometimes seven days per week. This work pattern was very disruptive to his family life and he became highly stressed. Mr Shaw was the sole civil site supervisor for the project and said that he confronted hostility in the work environment on a daily basis.

6. On 6 August 2008 due to the accumulation of excessive demerit points arising from six speeding offences over the previous two years, Mr Shaw elected to be of good behaviour for the following 12 month period to avoid facing suspension of his driver's licence. The effect of the undertaking was that if Mr Shaw committed an offence for which two or more demerit points were recorded during the following 12 month period, his licence would be suspended for a period of six months. Just five days before giving the undertaking however, a car driven by Mr Shaw was detected travelling at an excessive speed on the East Tamar Highway. In August 2008 Mr Shaw entered into a conspiracy whereby he falsely declared that his wife was driving the vehicle at the relevant time. An infringement notice was subsequently issued to Mr Shaw's wife which she accepted with the demerit points and fine being awarded against her.

7. On 29 September 2008, only twelve days after he made this false statutory declaration, Mr Shaw again drove his car at an excessive speed on the East Tamar Highway. He then entered into a second conspiracy similar to the first, except that it was with his sister. On 17 November 2008 he made a false statutory declaration stating that she was the driver and as a result a traffic infringement notice was issued to her.

8. Mr Smith's subsequent speeding offences are detailed in Chief Justice Crawford's comments on passing sentence. They occurred on 15 December 2008 and again on 18 December 2008 and on 21 January 2009. The crimes came to the attention of the police as a result of Mr Shaw being blackmailed. He sought advice from a police officer and from an ex-police officer and following such advice, decided to go to the police. After making full admissions he was later charged with offences to which he pleaded not guilty and was committed for trial. The six people he involved in his conspiracies were also charged and they also pleaded not guilty when committed for trial. His Honour commented that Mr Shaw's record reveals at least thirty speeding offences prior to the conspiracies and another three since. He has no record other than these many speeding offences.

9. In passing sentence, His Honour noted that Mr Shaw was working long hours in a difficult job and had suffered from depression for some time. He referred to the specialist reports which were tendered in evidence some of which address Mr Shaw's mental state at the time. A recent report suggests that at the time of the crimes, Mr Shaw was having significant psychological difficulties which may have impacted on his ability to make calm and rational decisions which His Honour accepted. Nevertheless His Honour observed that Mr Shaw was capable of holding a responsible job which no doubt called for many rational decisions which he was able to make successfully. His Honour accepted that Mr Shaw had displayed very poor judgement with regard to his speeding offences but that his psychological problems and pressures may have played some role in his offending. In his favour His Honour noted that Mr Shaw eventually demonstrated remorse and fully confessed to his crimes. He went on to state however:

"Cases like this usually result in a conviction for the crime which is called perverting justice. They regularly come before the Court. This is a very bad example of it because of the number of times he offended, the making of false statutory declarations, his soliciting of six other people to offend for him and the payment to one of them on two occasions." His counsel urged that he not be made to serve imprisonment. I regard this as such a bad case that a failure to imprison would be unduly merciful and would send a very poor message to others contemplating similar conduct. I repeat what has been said before in other cases, that crimes such as these strike at the well-being of our society at an absolutely fundamental level."

EVIDENCE

10. It was Mr Shaw's evidence that he has struggled with his mental health since the motor vehicle accident and in particular around the time when he committed the offences. Since serving his sentence in 2012 he has proactively tried to overcome his battles with depression and feels that he is in a much better mental state now than at the time of the offences. He has also learned how to cope with stress and anxiety and where possible, endeavours to avoid stressful situations.

11. The assets of The Fund currently comprise cash in a bank account. On 4 September 2008 the respondent commenced an audit of The Fund. During this audit, it was established that the trustees of The Fund had contravened various provisions of the SIS Act including leasing fund property to relatives of the members commencing the 2003-2004 income year; loaning money to members commencing the 2005-2006 income year; trustees of the fund acquiring and maintaining in-house assets of greater than 5% of The Fund's total assets (reaching over 80% as at 30 June 2008) commencing the 2003-2004 income year. The trustees of The Fund reported in-house assets exceeding 5% of The Fund's total assets for the 2005-2006 and later income years. During the audit the trustees contended that the contraventions had occurred because of bad advice from The Fund's auditor for the 2001-2002 to 2004-2005 income years. Further, a failure of their later adviser to assist the trustees in rectifying the contraventions and tardiness on the part of a third adviser.

12. The respondent accepted an undertaking from Mr Shaw to rectify the contributions by The Fund. By 20 November 2009 the respondent was satisfied that rectification had occurred and no other action was taken against The Fund or the trustees. The rectification involved Mr Shaw purchasing the residential property from The Fund and satisfying a $20,000 outstanding loan between Shaw Enterprises Partnership and The Fund.

13. The respondent contends and it is not disputed that in five out of the last seven years The Fund has lodged the required return after the lodgement end date (although one return was lodged only one day after the lodgement due date). Mr Shaw has also been responsible for the late lodgement of personal taxation returns and that of other entities with which he is associated. Mr Shaw states however, that he has never been penalised for a late lodgement of returns. The respondent contends that a strong indicator of whether the applicant is highly unlikely not to breach SIS Act requirements is an examination of his compliance history.

14. Mr Shaw resigned as trustee of The Fund effective from 1 May 2013. The respondent contends however, that Mr Shaw failed to immediately cease acting as the trustee of The Fund following his disqualification. This was despite being advised by the respondent on several occasions dating from 23 July 2012 that he was required to resign immediately.

STATUTORY FRAMEWORK

15. Mr Shaw automatically became a disqualified person under section 120 of the SIS Act as a result of his conviction for offences involving dishonest conduct. This meant that he could no longer act in certain capacities (including being a trustee) in relation to a superannuation entity. Because the offences in question did not involve "serious dishonest conduct" as defined by section 126B (2), Mr Shaw is entitled pursuant to section 126B, to ask the respondent for a declaration under section 126D waiving his status as a disqualified person within the meaning of the SIS Act.

16. The relevant considerations for the Commissioner are set out in section 126D (1A) which provides:

"(1A) If, having regard to any of the following:

(a)
the offence to which the application relates;
(b)
the time that has passed since the applicant committed the offence;
(c)
the applicant's age when the applicant committed the offence;
(d)
the orders made by the court in relation to the offence;
(e)
any other relevant matter.

The Regulator is satisfied that the applicant is highly unlikely to:

(f)
contravene this Act; and
(g)
do anything that would result in a self- managed superannuation fund not complying with this Act;"

17. In considering this provision in the Taxpayer v Commissioner of Taxation (2002) AATA 1233 Member BJ McCabe said at paragraph 9:

"The test focuses on prudential concerns. The subsection requires the Commissioner to determine whether the applicant can be trusted to observe the requirements imposed by the law if he is allowed to remain in a position of responsibility."

18. The Tribunal must consider whether Mr Shaw is "highly unlikely" to firstly, contravene the SIS Act; and secondly, do anything that would result in any self-managed superannuation fund contravening the SIS Act. In making this assessment the Tribunal must have regard to the factors listed in subsection (1A), each of which is separately considered as follows.

THE OFFENCE TO WHICH THE APPLICATION RELATES

19. The offences committed by Mr Shaw were five counts of conspiracy relating to statutory declarations for motor vehicle offences pursuant to section 297(1)(d) of the Criminal Code 1924 (Tas). It is Mr Shaw's contention that the nature of the offences committed were not in connection with, or relevant to, his duties as trustee.

20. The Commissioner in his decision considered that the offences involved a major element of dishonesty over an extended period of time, involving five separate occasions. He noted that the applicant had involved other persons in the commission of the offences which required planning and coordination. The Commissioner commented that the situation was not a one-off but involved premeditated action, noting that conspiracy is a serious crime which in the applicant's case resulted in a sentence of imprisonment. The Commissioner referred to the governing rules for superannuation entities set out in sub-section 52(2) of the SIS Act which require a trustee to act honestly in all matters concerning the entity.

21. It is submitted on behalf of Mr Shaw that subsection 52(2) is not a relevant consideration because Mr Shaw's dishonest conduct had no connection with his role as a trustee. It is contended that the effect of the Commissioner's submission would undermine Parliament's intention that persons automatically disqualified should be able to have their disqualification waived, based on a consideration of the circumstances in section 126D.

22. It is contended that the Commissioner's reasoning incorrectly considers the seriousness of a contravention which is a consideration regarding disqualification under the provisions of 126A of the SIS Act. It is accepted that every dishonest conduct offence is serious as recognised in the Act, because it results in automatic disqualification under section 120(1)(a)(i). The seriousness of the contravention is not a consideration under section 126D because the word "seriousness" is not included in this provision. The focus of section 126D is whether a prudential risk is posed to a superannuation fund having regard to the totality of the evidence and the particular circumstances of each case.

23. Reference is made to the Tribunal's decision in the VX96A and Insurance and Superannuation Commissioner (1996) 23 AAR 427 where it said at page 435:

"The general nature of the offence has to be judged against whether the applicant is highly unlikely to pose a "prudential risk to superannuation entities". The term "prudential" is not defined in the SIS legislation. It should be attributed its ordinary meaning, which in The Shorter Oxford Dictionary includes:
"1. Of, of the nature of, or involving prudence, characterised by forethought and deliberation."
The Macquarie Dictionary refers to "prudential" as "...pertaining to, or characterised by prudence" and defines "prudence" as:

"1.
cautious practical wisdom; good judgment; discretion;
2.
The quality or fact of being prudent;
3.
regard for one's own interests;
4.
provident care in management; economy or frugality."

Thus, in the context of a s 126 C(5), the Tribunal must be satisfied on the totality of the evidence before it that the applicant is highly unlikely to pose any risk in the exercise, as an officer of a company which is to be a trustee, of his judgment, wisdom and provident care in the management of the superannuation entities under his control. In the later context, in the circumstances of this case, it is not so much the significance of the sums involved in the offences committed by the applicant but rather the issue of whether, given the fact that the offences were committed, people entrusting superannuation funds can be assured that it is highly unlikely that in the discretions exercised, the wisdom adopted, the judgment applied and the provident care extended in the management of the funds, the applicant's actions would be highly unlikely to pose any risk. Against that background, the Tribunal will now consider the evidence."

24. The respondent disputes the applicant's assertion that his dishonest conduct has no connection with his role as a trustee. The respondent contends that an offence of dishonesty or corruption is one that is contrary to the fiduciary standards expected and required of a trustee of a superannuation fund and is a serious offence. The respondent referred to the Chief Justice's comments on passing sentence on the applicant where he said:

"This is a very bad example of it (the crime of conspiracy) because of the number of times he offended, the making of false statutory declarations, the soliciting of six other people to offend for him and the payment of one of them on two occasions."

25. The respondent submits that knowingly and systematically making false statutory declarations and instigating a conspiracy with others to pervert the course of justice is fundamentally contrary to the standards expected of a trustee, and weighs against the applicant being granted a waiver of his disqualified status.

THE TIME THAT HAS PASSED SINCE THE APPLICANT COMMITTED THE OFFENCE

26. The offending took place almost six years ago. It is submitted by the respondent that the time elapsed since the last offence is too short to be recognised as a factor to influence a decision in the applicant's favour. Reference is made to Member McCabe's statement in The Taxpayer (supra) where he said at paragraph 17:

"The words of the subsection make it clear that an offence might be viewed in a more benign light if it occurred a long time ago, and the applicant has had an unblemished track record since."

27. The Commissioner considered that because the applicant had not had the opportunity to demonstrate an honest character over many years since the offences, there was minimal support for his waiver application under this subsection.

28. The evidence was that the applicant had not committed any further offences since he was sentenced in 2012.

THE APPLICANT'S AGE WHEN THE APPLICANT COMMITTED THE OFFENCE

29. Mr Shaw was aged between 45 and 46 when the offences were committed. In his objection decision, the Commissioner considered that being a mature adult does not support an application for waiver. The Commissioner noted however, that the applicant had taken responsibility for his actions and had conceded that his conduct was dishonest.

30. It is submitted on behalf of Mr Shaw, that his age does not preclude the Tribunal from considering that it is highly unlikely that he or The Fund will contravene the relevant legislation in the future.

31. The respondent submits that as a mature adult at the time of offending, the applicant would be expected to have the capacity to judge between honest and dishonest conduct. It is submitted that his age at the time of offending and at present, are factors weighing against being satisfied in the requisite manner.

THE ORDERS MADE BY THE COURT IN RELATION TO THE OFFENCE

32. The Court ordered that Mr Shaw serve six month's imprisonment and pay levies amounting to $250.55. At the time of sentencing His Honour commented that it was:

"such a bad case that a failure to imprisonment would be unduly merciful and would send a very poor message." Further, "that crimes such as these strike at the well-being of our society at an absolutely fundamental level."

33. It is submitted by the respondent that the period of imprisonment is relevant in assessing the risk posed by the applicant in contravening the SIS Act or doing anything that would result in a self-managed superannuation fund not complying with the SIS Act. The respondent accepts the applicant's contention that a relevant consideration is a nexus between the orders of the Court and the likelihood of the applicant contravening the SIS Act. The applicant contends that there is no nexus between the orders of the Court in the likelihood of the applicant contravening the Act.

ANY OTHER RELEVANT MATTERS

34. Mr Shaw submits that the Commissioner incorrectly considered his personal lodgement history rather than whether, considering the offence, he or The Fund is highly likely to contravene the Act. The Commissioner commented that lodgement history is an indicator of the level of confidence in an SMSF complying with the SIS Act requirements. Under section 35D of the SIS Act it is an offence for a trustee of an SMSF not to give the return mentioned in the section to the Commissioner by the end of the reporting period. The Commissioner also noted the applicant's failure to meet lodgement compliance obligations for his personal returns and immediately cease acting as the trustee of his SMSF following disqualification.

35. Mr Shaw contends that his personal lodgement history and that of The Fund have no connection with the offence. It is submitted that section 126D clearly requires a connection between the offence and the likelihood of a future contravention. Mr Shaw contends that of relevance are his most recent dealings with the Commissioner in the context of the Act when he entered into an enforceable undertaking to correct identified breaches and complied with the terms of that undertaking.

36. The respondent refers to the applicant's lodgement history and the fact that there have been a number of past contraventions of the SIS Act by the applicant which covered a period of several years and involved substantial assets of The Fund. These factors, it is contended, do not support a finding that the applicant is highly unlikely to contravene the SIS Act.

37. A matter raised by Mr Shaw is his depression since the motor vehicle accident in 2003. It is contended that the Commissioner did not place sufficient weight on Mr Shaw's mental health at the time of the offences in the context of considering the likelihood of him contravening the SIS Act in the future. The Commissioner noted that in conjunction with Mr Shaw's improved personal circumstances, he states that his mental health has improved markedly. It is contended by Mr Shaw that a relevant consideration is that the cause of his problems which resulted in the conviction has abated.

38. Whilst accepting that Mr Shaw had psychological difficulties which may have impacted upon or contributed to his ability to make rational decisions, the respondent submits that there is no evidence that they were the cause of the offences. It is noted that His Honour observed that Mr Shaw was capable of holding a responsible job which, no doubt, called for many rational decisions which he was able to make, apparently with success. Whilst Mr Shaw's mental health may have been an influence at the time, the respondent contends that that it does not absolve him from responsibility. Further that although his psychological difficulties may have been a relevant mitigating factor in sentencing, they have less influence when it comes to the question of the likelihood of Mr Shaw contravening the SIS Act provisions in the future.

39. Mr Shaw referred to multiple character references from high standing individuals in the community which he contends were not given sufficient weight by the Commissioner. The Commissioner noted that they had been tendered to the Court as part of the sentencing process and that the applicant's referees speak highly of him, viewing him as honest, hard-working and a strong contributor to the community. The respondent maintains that the character references do not provide any guidance or insight as to whether it is highly unlikely that the applicant would pose a prudential risk.

40. The respondent submits that the applicant's claim that his disqualification from acting as a trustee will cause undue hardship with his retirement plan, is an entirely irrelevant consideration to the question at hand.

41. Reference is made to the Explanatory Memorandum to the Temporary Modification Declaration Number 14 which states at paragraph 29:

"The power to waive disqualification conferred by section 126C (as it then was) is only intended to be used where it can safely be concluded that the applicants conviction of the offence involving dishonest conduct is irrelevant to his or her ability to perform in a prudent and honest fashion the duties of a trustee, investment manager or custodian. The power will usually only be exercised where the offence concerned is genuinely trivial and occurred a long time ago, e.g. when the perpetrator was not yet an adult."

42. The Explanatory Memorandum to the Superannuation Industry (Supervision) Legislation Amendment Act 1995 states at page 21:

"87. This item inserts after section 126 A of the SIS Act section 126B, 126C, 126D, 1206E and 126F. These sections have been inserted to allow the Commissioner to waive the disqualified person requirements for trustees, and responsible officers of trustees, investment managers and custodians of superannuation entities, if the Commissioner believes, given the information provided, that the person is highly unlikely to be a potential risk to a superannuation entity.
88. Currently the impact of the disqualified person provisions means, for example, that even persons whose only offence was a minor offence involving dishonesty 20 years ago, for example shoplifting, are disqualified person and cannot act as a trustee, or as responsible officers of trustees, investment managers or custodians. These new sections will enable the Commissioner to waive the disqualified person status of such an individual."

CONSIDERATION AND FINDINGS

43. The sole issues for the Tribunal to determine in considering whether to waive the applicant's status as a disqualified person are whether he is highly unlikely to firstly, contravene the Act and secondly, do anything that would result in an SMSF not complying with the Act. If the Tribunal is so satisfied then it must make a declaration waiving the applicant's status as a disqualified person.

44. The Tribunal's decision is guided by a consideration of the five factors outlined in subsection 126D (1A) which have been discussed above. As stated by Member McCabe in The Taxpayer (supra) at paragraph 12.

"The use of the words "highly unlikely" in the subsection confirms the Parliament intended to place a premium on investor protection. It is not an easy stand to satisfy. The fact the applicant might incidentally suffer hardship as a result of the disqualification is therefore irrelevant."

45. Member McCabe referred to the Tribunal's decision in re VX96A and Insurance and Superannuation Commission (Supra) which he considered illustrates the correct approach. At page 435 the Tribunal explained that it:

"... must be satisfied on the total relative evidence before it that the applicant is highly unlikely to pose any risk in the exercise, as an officer of a company of which is to be trustee, of his drudge shouldn't, wisdom and provident carer and the management of the superannuation entities under his control. In the latter context, in the circumstances of this case, it is not so much the significance of the sums involved in the offences committed by the applicant but rather the issue of whether, given the fact that the offences were committed, people entrusting superannuation funds can be assured that it is highly unlikely that in the discretions exercised, the wisdom adopted, the judgement applied and the provident care extended in the management of funds, the applicants actions would be highly unlikely to pose any risk."

46. The above Explanatory Memoranda refer to minor and trivial offences involving dishonesty that were committed some time ago for example, when the perpetrator was not yet an adult. These considerations are very different from those pertaining to Mr Shaw in this case. It is not suggested that the offences for which Mr Shaw was convicted and sentenced to a term of imprisonment were in any way minor or trivial. The seriousness of the offences has indeed been accepted and recognised by Mr Shaw although he has maintained that there were factors such as the poor performance of his barrister that contributed to the length of the prison term imposed which he considers was excessive in the circumstances.

47. In his letter addressed to the respondent dated 5 February 2013 in support of application for a waiver of disqualified status, Mr Shaw claims that that the offences committed were completely uncharacteristic of his normal behaviour. He said that he had made some poor choices during a particularly difficult period when he was experiencing significant work stresses, financial duress combined with physical and mental ill health. He contends that his offences were carried out with the guidance, assistance and inducements of a police officer who had befriended him. He states in the letter:

"his guidance and encouragement to break the law were highly influential, thereby clouding my thoughts about right from wrong. Had I not been in such a state of mental ill health, I am certain I would not have made such poor choices. Moreover, had the police officer steered me in a lawful direction rather than partake in an unlawful one; the offences would most definitely not have eventuated. In fact, it could be said that the police officer had the opportunity to avert the offending. He had choices, as did I. However he chose to not only break the law but encourage, assist and bribe me to break the law."

48. Mr Shaw goes on to state that unfortunately the sentencing judge was not aware of these facts as they were suppressed from the court. He believed that if the judge had heard these facts the outcome would have been more favourable. He also states that in his barrister's opinion, the sentence was excessive despite significant grounds for mitigation. Mr Shaw blames his barrister for the sentence outcome. Whilst deeply remorseful for his wrong doings, Mr Shaw states that his offending was without criminal intent or disregard for the law. There was no financial gain on his part and nor for the victims. His only motive in trafficking demerit points was to maintain a current driver's licence in order to keep his job. He considers that he has been punished well beyond what he considers justice. He attempts to assure the Commissioner that if his disqualification status is waived he would resume operating the S and J Shaw Superannuation Fund with the highest degree of integrity and professional conduct.

49. In passing sentence Chief Justice Crawford referred to Mr Shaw's record, character testimonials, earlier motor vehicle accidents, working conditions and his mental health. His Honour accepted that Mr Shaw's psychological problems and pressures may have played some role in his offending. Whilst he may not have been aware of Mr Shaw's relationship with the police officer who he claims encouraged him to offend, His Honour considered the crimes of which Mr Shaw was convicted to be "very bad examples" of perverting justice because of the number of times he offended, the making of false statutory declarations, soliciting six other people to offend for him and the payment to one of them on two occasions. His Honour regarded this as "such a bad case that a failure to imprison would be unduly merciful and would send a very poor message to others contemplating similar conduct." He went on to state: "I believe what has been said before in other cases, that crime such as these, strike at the well-being of our society at an absolutely fundamental level."

50. The Tribunal accepts that the offences did not involve any financial gain for Mr Shaw however they were serious offences of dishonesty committed on no less than some six occasions and involved six other persons who Mr Shaw solicited to offend for him. In his letter of 5 February 2013 Mr Shaw attempts to explain and in some way justify his behaviour claiming that had the police officer steered him in the right direction, the offences would not have occurred. This can in no way be a satisfactory explanation for Mr Shaw's dishonest behaviour nor in any way detract from the seriousness of the offences. It is true that the nature of the offence must have some connection with the Tribunal's consideration of whether the applicant is highly unlikely to contravene the Act. Mr Shaw's attempted explanation and excuses for his actions that gave rise to the offences, do not persuade the Tribunal that he is a highly unlikely to contravene the provisions of the Act in the future. As Senior Member McCabe said in the Taxpayer (Supra) at paragraph 16 "The management of superannuation funds is no place for the ethically challenged."

51. Nor are there any other circumstances such as the time that has elapsed since the commission of the offences, nor his age, nor the sentence imposed by the court that would lead the Tribunal to any other conclusion. It is not simply a question of whether the applicant is likely or unlikely to contravene the provisions of the Act in the future. The use of the words "highly unlikely" indicates that Parliament intended a high standard of satisfaction that the applicant would pose no prudential risk. The nature of the offences committed by Mr Shaw display serious poor judgement. The fact that he knowingly and systematically made a number of false statutory declarations and instigated a conspiracy with others to pervert the course of justice is fundamentally contrary to the standards expected of a trustee. The offences only came to the attention of police as a result of Mr Shaw being blackmailed. Mr Shaw did not plead guilty to the offences at the earliest opportunity. His Honour noted that whilst Mr Shaw demonstrated remorse and fully confessed to his crimes, he questioned why he allowed the proceedings to drag on rather than plead guilty to them at an early stage.

52. The Tribunal considers that Mr Shaw's history of non-compliance and earlier breaches of the SIS Act are relevant factors weighing against a finding of it being highly unlikely that he would contravene the Act in the future.

53. At the conclusion of the hearing the Tribunal directed that the parties file further written submissions and an agreed statement of facts with respect to issues that arose at the hearing. They concerned Mr Shaw's claim that his previous adviser had provided him with incorrect advice resulting in the breach by The Fund of provisions in the SIS Act in the 2006 income year. The further information requested was regarding: the annual auditing and reporting processes required for SMSFs and the role of an approved auditor; details of the applicants accountant for the relevant income years including possible deregistration; details of how the funds non-compliance came to the attention of the respondent; and details of the applicable legislative provisions regarding the resignation of a trustee of an SMSF and the consequences for The Fund.

54. The applicant outlined the applicable legislative provisions prior to and following the amendments to the SIS Act which inter alia, require that a trustee of an SMSF must ensure that an approved SMSF auditor is appointed each income year to provide the trustee with a report (see section 35C (1). It is submitted by Mr Shaw that the Tribunal should be satisfied that the increased experience and competence required of professional advisers under the SIS Act is a relevant consideration in assessing whether the applicant is highly unlikely to contravene, or cause The Fund to contravene the SIS Act.

55. It is acknowledged by the respondent that there are now more stringent standards expected of SMSF auditors but contended however, that this is not relevant to the assessment as to whether the applicant is highly unlikely to contravene, or cause a fund to contravene the SIS Act. It is contended that by the time an auditor has discovered any contraventions, the SIS Act has already been contravened. It is submitted that it is the trustee who has the ultimate responsibility for the conduct of a SMSF. The trustee is required to be aware of his prudential obligations and is ultimately responsible for ensuring that a SMSF complies with all the relevant rules and regulations. It is submitted that it is not sufficient to merely rely on an approved auditor as a failsafe measure. The tightened legislative regime means that the Commissioner will become aware of breaches more readily but it does not ensure that breaches will not occur.

56. The respondent maintains that the evidence demonstrates Mr Shaw's lack of insight into the gravity of his conduct which led to the offences of dishonesty. It is disputed that the Commissioner accepted that Mr Shaw had been the victim of poor professional advice but instead stated that he "appeared" to have been the victim of poor professional advice. The respondent maintains that knowingly and systematically making false declarations is fundamentally contrary to the fiduciary standards expected of a trustee and is indicative of the prudential risk the applicant poses.

57. The Tribunal accepts the submissions advanced by the respondent regarding the implications of the amending legislation which requires the annual appointment of an approved SMSF auditor. The Tribunal is not persuaded that the applicant has satisfactorily demonstrated to the requisite degree that he is highly unlikely to contravene or cause a fund to contravene the SIS Act.

CONCLUSION

58. For the reasons outlined above, the Tribunal finds that the evidence presented with respect to the criterion listed in section 126D (1A) does not satisfy it to the requisite degree. As stated above, the use by the legislature of the words "is highly unlikely" demonstrates that the threshold required to have a disqualified status waived is a high one. The onus rests with the applicant to demonstrate that he is highly unlikely to contravene or cause a fund to contravene the SIS Act. The applicant has failed to discharge that onus and accordingly the Tribunal determines to affirm the decision under review.