Director’s breach of fiduciary duties results in a clawback of super contributions

A Matter of Trust

Taxation in Australia

The decision of the Victorian Court of Appeal in Australasian Annuities Pty Ltd (in liq) v Rowley Super Fund Pty Ltd 1 (Rowley Super) concerns the ability of a liquidator to claw back contributions made to a superannuation fund where such contributions are made as a result of a director breaching his fiduciary duties to the corporate trustee of a discretionary trust. The court unanimously upheld the trial judge’s decision that the director breached his duties to the shareholders of that company. However, a 2:1 majority allowed the appeal from the Supreme Court on the basis that the sole director of the discretionary trust trustee was also the controlling mind of the corporate trustee of the self-managed superannuation fund (SMSF) and therefore the knowledge of the director’s breach could be imputed on the SMSF trustee.
What some directors (and their advisers) may find concerning about the outcome of the appeal decision is the fact that this type of transaction occurs regularly and is often seen as a “normal” transaction.

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