Back to blog

Before you step off the kerb without looking – SMSF trustees and enduring power of attorneys

Have you ever thought about what would happen to not only your personal affairs, but your superfund if you were no longer able to make financial decisions? Particularly, if it were because of ill health or an accident?

The current Superannuation rules state you could potentially lose half of your fund assets in one foul swoop without a valid Enduring Power of Attorney in place.

If you do not have one, there has never been a better time to speak to us about how to protect your fund’s assets.

The current rules:

  • Your fund trust deed and corporate trust deed must allow for an attorney to replace you as Director or Trustee. (1)
  • You must have a Power of Attorney that endures during a period of ill health or circumstance.

The potential outcome:

  1. In the event you become unable to perform your responsibilities as trustee your fund can fail the definition of an SMSF. (2)
  2. This means that ATO could deem your fund to be Non-Complying. (3)
  3. The ATO definition of “Non-Complying” means: “A non-complying fund is taxed at the highest marginal tax rate (currently 45%) on its income and the market value of assets just before the start of the year in which it is made non-complying rather than only on the income of the fund at the concessional rate of 15%.” (4)
  4. Your employer will not be able to contribute to your fund until it is deemed complying by the ATO.
  5. Trustees will be potentially liable for administrative penalties handed out by the ATO. These cannot be paid with fund assets.

So… If you are an SMSF Trustees and do not have an Enduring Power of Attorney please contact our office for a review of your SMSF trust deed and estate plan.

Written By | Tim Hannes | Principal Edge Financial Services | April 2016.

Note: This article is for general information purposes only and does not constitute advice. With all of these options there are a number of considerations outside the scope of what is covered in this article that you should discuss with your financial advisor to ensure your personal circumstances are taken into consideration.

References

1 Corporations Act 2001 – Sect 201K: http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s201k.html

2 SIS Definition of an SMSF: http://www.austlii.edu.au/au/legis/cth/consol_act/sia1993473/s17a.html

3 PS LA 2006/19 – Para 11: http://law.ato.gov.au/atolaw/view.htm?DocID=PSR/PS200619/NAT/ATO/00001&PiT=99991231235958

4 SMSFR2010/2 – Para 68: http://law.ato.gov.au/atolaw/view.htm?docid=%22SFR%2FSMSFR20102%2FNAT%2FATO%2F00001%22

 

Back to blog