Enduring Powers of Attorney and Self-Managed Super Funds
Enduring Powers of Attorney (EPOA) are well-known as an important estate planning tool whereby a person can nominate who will make key decisions on their behalf. However, EPOA documents are also an essential tool for the management of SMSFs.
One of the fundamental rules of SMSF compliance is that members of a SMSF must retain control of the SMSF either as individual trustees, or as directors of a corporate trustee. Where the members are not trustees/directors, there will be a breach of s 17A of the Superannuation Industry Supervision Act (‘SIS Act’) that could cause the fund to be non-compliant, and see it taxed at the highest marginal rate.
A common reason why a member would not be a trustee/director is loss of capacity. The SIS Act countenances this, allowing for a person holding a valid EPOA over a member who has lost capacity to assume the role of trustee/director without affecting the fund’s compliance. Given that SMSF members are often spouses, who are also likely to be the nominated attorney for each other under an EPOA, this transition can be seamless. The spouse holding EPOA remains as trustee/director for both members, and the spouse without capacity is removed.
It should be noted that the SMSF trust deed must allow for this process and may need to be updated.
The EPOA also proves invaluable in other situations. For example, a member may simply be reluctant to act as trustee/director, in which case the process above applies, whereby the member’s nominated attorney assumes the role as trustee/director. Similarly, an EPOA is key where a member is overseas for an extended period. The SIS Act requires the central management and control of a SMSF to be in Australia, and as such a member who plans to be overseas for an indefinite period should ensure a valid EPOA is executed in favor of a person who will remain in Australia for the entire time that the member is overseas.
If you would like to discuss EPOA documents and what they can achieve for you, please contact Partners Legal.
*This article is intended to be general commentary only and should not be taken as legal advice. Before taking action, ensure you obtain legal advice in relation to your specific circumstances.