Phone: (03) 9563 4688

Email: office@aubreypaton.com.au

Address: 17D Chester Street, Oakleigh VIC 3166

Latest Accounting News
Hot Issues
300,000 SMEs utilising $20K write-off, says ATO
‘A bad thing times 10’: ATO set for new SMSF blitz
Capital Gains and Renounceable Rights
Paperwork bungles lead to $38k in payments
Australian Dietary Guidelines and healthy eating chart (PDF)
Former director liable for company’s unpaid tax liabilities
Resources on our site to help you, your family and your friends.
Super for housing measures enter Senate
No Special Circumstances to allow Excess Super Contributions
Housing tax measures progress to Parliament
AirBnb – wrong tax outcome?
Are young investors wasting their youth?
ATO sending 'more letters than ever' on income tax errors
Powerful Budgeting, cash flow and Super Tools available on our site.
Property, unit trusts in ATO's sights
Australian Dietary Guidelines and healthy eating chart (PDF)
Major Bank Levy Passed
NSW tops list as ATO reveals billions in lost super
How is your super going, ready for retirement?
Australia's leading causes of death - ABS
ATO increasing data exchange with international regulators
Illegal SMSF early access scheme leads to $6,000 fine
Our 'hardest' SMSF tasks
Uber drivers hit for 10% tax
Lack of literacy promotes unrealistic goals
Taxpayer failed to prove that payments were “loans”
New STP dates confirmed as ATO goes on compliance blitz
ATO flags compliance project for FY17/18
Items that heat up your depreciation deductions
Articles archive
Quarter 3 July - September 2017
Quarter 2 April - June 2017
Quarter 1 January - March 2017
Quarter 4 October - December 2016
Quarter 3 July - September 2016
Quarter 2 April - June 2016
Quarter 1 January - March 2016
Quarter 4 October - December 2015
Quarter 3 July - September 2015
Quarter 2 April - June 2015
Quarter 1 January - March 2015
Quarter 4 October - December 2014
Quarter 3 July - September 2014
Quarter 2 April - June 2014
Quarter 1 January - March 2014
Quarter 4 October - December 2013
Quarter 3 July - September 2013
Quarter 2 April - June 2013
Quarter 1 January - March 2013
Quarter 4 October - December 2012
Quarter 3 July - September 2012
Quarter 2 April - June 2012
Quarter 1 January - March 2012
Quarter 4 October - December 2011
Quarter 3 July - September 2011
Quarter 2 April - June 2011
Quarter 1 January - March 2011
Quarter 4 October - December 2010
Quarter 3 July - September 2010
Quarter 2 April - June 2010
Quarter 1 January - March 2010
Quarter 4 October - December 2009
Quarter 3 July - September 2009
Quarter 2 April - June 2009
Quarter 1 January - March 2009
Quarter 4 October - December 2008
Quarter 3 July - September 2008
Quarter 2 April - June 2008
Quarter 1 January - March 2008
Quarter 4 October - December 2007
Quarter 2 April - June 2007
Quarter 1 January - March 2007
Quarter 2 April - June 2006
Quarter 1 January - March 2006
Quarter 4 October - December 2005
Quarter 3 July - September 2005
Quarter 4 of 2014
Articles
FBT – Christmas Parties and Taxi Fares
Hiring older employees
Deadline - 19th December 2014
Traps in Making Family Trust Distributions
Data matching offshore bank accounts
Estate planning in an SMSF.
Maximising the benefit of Credit Cards
Warning on Bank Offset Accounts
Mining tax gone but watch for associated tax changes
Estate planning in an SMSF.

 

Estate planning in an SMSF: Eight things your clients can do now.


     

 




     


Putting some or all of these suggestions in place may save your clients a great deal of worry, time and expense.


Increasingly, your client’s super is the next major asset after the family home (sometimes it is the client’s most significant asset, as recently demonstrated in McIntosh v McIntosh [2014] QSC 99).


It is therefore imperative that any estate planning for your client must also involve planning for their SMSF.


Here are eight things that you can do now for all your SMSF clients:


1. Consider what ‘Armageddon’ is for every SMSF


What is each fund’s 'Armageddon', or worst case scenario?


This will be subjective for each SMSF.


For example, in a 'husband and wife' fund where the wife always left the running of the fund to her husband, what if the husband suddenly died or lost mental capacity? Could the wife continue with the fund, or would it all be too hard for her?


2. Check the trust deed and (for a corporate trustee) the trustee constitution


It is essential for the constituent documents of the fund to authorise any ‘Armageddon’ strategies to be implemented.


For instance, making a binding death benefit nomination (BDBN) can achieve certainty regarding payment of a super death benefit, and can prevent disputes. However, does the fund trust deed authorise a BDBN to be made? If so, would the BDBN lapse after three years or can it be non-lapsing?


What about the trustee constitution? In a two-member fund with a corporate trustee, if one member dies the survivor can usually carry on as the sole director/shareholder. However, the trustee constitution must authorise this.


3. Amend trust deed and/or constitution if unsatisfactory


If the fund trust deed and/or trustee constitution do not authorise the relevant ‘Armageddon’ strategies, they will require amendment.


Consider also whether the trust deed should be completely updated (a common strategy) or should the amendment be more bespoke (especially where necessary to “grandfather” previous provisions).


4. Discuss ‘Armageddon’ with your clients


If the worst case scenario happened, what are the options? For instance:


  • Could the surviving member continue to operate the fund, perhaps as a sole director of a corporate trustee?
  • Or would it be better to simply wind up the fund and rollover to an APRA-regulated or small APRA fund?

5. Consider using the same trust deed for all SMSFs


If you have many clients who came to you with an existing SMSF trust deed, these conversations may be very different for each of them depending on what their trust deed says.


It may make sense (and ultimately save your clients angst and expense) to have the trust deeds for all your clients fully updated to a modern trust deed, well before their ‘Armageddon’ arrives.


6. Ensure all members have valid EPOAs


If all fund members have an up to date enduring power of attorney (EPOA), it makes things much easier in the event that:


  • A member loses capacity - their attorney can become the trustee or director of the trustee in their place under s.17A of the SIS Act;
  • A member departs overseas indefinitely - their attorney can become the trustee or director of the trustee in their place to avoid fund residency issues.

However, you need to ensure (on an ongoing basis) that the person nominated as attorney is not a disqualified person (e.g. someone convicted of an offence involving dishonesty), otherwise they will not be able to act as trustee or director of the trustee in place of the member.


7. Ensure BDBNs are up to date and non-lapsing


The last thing your clients need is for a situation like in Katz v Grossman or McIntosh v McIntosh to happen to them!


SMSFD 2008/3 confirms that, with a correctly-structured trust deed, a well-written BDBN can provide both certainty and an appropriate and tax-effective succession of your clients’ superannuation death benefits.


Whilst being non-lapsing means not having to remember to renew a BDBN, another issue is that some SMSFs don’t authorise a BDBN to be made by a member’s enduring attorney, so if it lapses and the member has since lost capacity the BDBN cannot be renewed.


8. Change from individual trustees to corporate trustee


For many reasons it is prudent to change from having individual trustees to a single corporate trustee, such as:


  • Ease of administration on the death, bankruptcy or incapacity of a member;
  • Ease of administration if a member departs overseas; and
  • Minimise the risk of incurring multiple 'speeding ticket' fines from the ATO.

 


Wednesday 8 October 2014
Brian Hor, special counsel – superannuation and estate planning, Townsends Business & Corporate Lawyers and Caroline Harley, associate, superannuation, Townsends Business & Corporate Lawyers


 


 




27th-October-2014