Powers of Attorney for SMSF's

To comply with the legislation regarding self-managed superannuation funds (“SMSFs”), SMSFs are required to have all members appointed as trustees, (or if there is a corporate trustee, as directors of the trustee company). In other words, the general position is that to be a complying SMSF, no one can be a trustee (or director) who is not a member, and no one can be a member who is not a trustee (or director). This has posed difficulties for members of a SMSF who are residing overseas, or who for personal reasons no longer wish to carry the responsibility of being a trustee or director of a trustee.

Powers of attorney alone are not the answer, as the Powers of Attorney Act 2003 does not allow a person to confer on an attorney the authority to act as a trustee or as a director.

However, the ATO has now released a ruling which stipulates that if a person has appointed someone to be their attorney pursuant to an enduring power of attorney, the attorney can act as trustee or be a director, if the member resigns as trustee/director and the attorney is appointed in the member’s place.

The attorney is considered to be acting in his or her own capacity. Even though having been appointed attorney is a requirement, he or she is not considered to be acting as the member’s agent in respect of the trusteeship/directorship.

Of course, great care must be taken to ensure that:

• The power of attorney is valid;
• The removal of the member and appointment of the attorney as trustee/director is valid;
• The steps taken comply with the SMSF trust deed, the constitution (in the case of a corporate trustee), and all relevant legislation;
• The SMSF is in all other respects a complying fund.

It is vital to get the process exactly right, as there are significant taxation consequences for a fund ceasing to be a complying fund.

However, with the right help, this process can allow people who are intending to reside overseas, or no longer wish to carry the responsibility of managing a fund, to keep their fund compliant.

For more information, please contact Stephen Lynch.