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Visitor
Posts: 1
Registered: ‎18-07-2016

SMSF Trustee

I have a client in NSW who is the sole director of the corporate trustee for his SMSF.  He has diminished capacity due to illness and is no longer in a position to make decisions on behalf of the fund.  Before losing capacity he appointed his son as Enduring Power of Attorney.  My understanding is that for his son to make decisions for the SMSF moving forward the process is for him to be appointed as a shareholder and then exercise his power as a shareholder to appoint himself director of the corporate trustee?  Is there anything else I need to consider?

Contributor
Posts: 65
Registered: ‎10-11-2015

Re: SMSF Trustee

I'm sure that I'll be corrected if I'm wrong, but I think all he has to do is use his power of attorney to appoint himself as the sole director of the trustee company in his father's stead. This should be done ASAP.

SuperConcepts expert
Posts: 9
Registered: ‎14-03-2016

Re: SMSF Trustee

A person can be appointed as trustee of an SMSF or director of the corporate trustee, of an SMSF, in the place of the member where they hold an Enduring Power of Attorney (EPoA) for that member. They must actaully be appointed, you cannot simply rely on the EPoA. The holder of the EPoA is appointed in their own right and not as agent for the member. Consequently, they are subject to penalties for any SIS or Corporations Law breaches, as they would apply to the member.  The member who is currently a director must also cease to be a director (they can continue to be a shareholder). Check the company's Constitution to see if they are automatically removed as a director due to loss of capacity.

 

There is no requirement, under the SIS Act, for the person holding the member's EPoA to be a shareholder. However, you should check the Constitution of the corproate trustee for the process of appointing a director. The power to appoint a director may fall to the shareholders. Iif this is case, where there is only one shareholder (the dad), the son, who holds his dad's EPoA, can use the EPoA to vote for his dad to appoint himself as director - again check the Constitution for the process.

 

Also, ensure you notify ASIC and the ATO of the change of directors within the prescribed period as late notice can result in penalties, particualry from ASIC.

 

This scenario highlights the importance of SMSF members having an EPoA, particulary where the SMSF it is a single member fund. It also demonstates the advantage of having a corporate trustee. In this situation, there will be no requirement to change any title of fund assets, as they should already be in the name of the corporate trustee and you are not changing this, just the directorship.

 

For further ATO guidance on this issue you can refer to SMSFR 2010/2, which you can access from the ATO's website.

Contributor
Posts: 46
Registered: ‎03-12-2015

Re: SMSF Trustee

Don't forget the option to switch to a Small APRA fund with a professional trustee as the EPOA may find the trustees duties onerous if they are already busy with taking care of the parents personal care needs and their own family and career as well. Worth exploring and understanding all exit options.

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