What is a SMSF?
SMSF stands for self-managed super fund. It is a private superannuation where the members of a SMSF are usually also the trustees. Members of the SMSF run it for their benefit and are responsible for complying with the relevant laws.
A SMSF can have up to four (4) members but it is quite common to have a SMSF with one (1) member. But what happens if the sole member loses legal capacity, dies or leaves the country?
A SMSF trustee is the person responsible for ensuring SMSF is maintained for the purpose of providing retirement benefits. The trustee can be a company or an individual.
For a single member SMSF, a company trustee, the member must either be the sole director or have two directors, the other of which is either related to the member or another person who is not an employer of the member.
For a single member SMSF, there must be two individual trustees, the other of which must either be related to the member or be another person who is not an employer of the member.
Issue 1: Losing Legal Capacity
If the sole member loses legal capacity, then the person who holds an enduring power of attorney for the member may act as trustee of the fund in their place.
If the sole member was also the sole director of a trustee company, then the shareholder of the company will need to appoint a replacement director. If the member was the only shareholder, then the probate of the member’s will needs to be granted before a new shareholder is appointed.
Issue 2: Death of a Sole Member
If the sole member dies, then the other trustee will be left with total control of the fund.
If the sole member was also the sole director of a trustee company, then the same consequences from the first issue will apply.
Issue 3: Moving Overseas
The SMSF must remain an Australian superannuation fund in order to retain its complying status. Whether the super fund is Australian predicates on satisfying the three tests:
- Be established in Australia
- Have its central management and control ordinarily in Australia
- Satisfy the active member requirement. The fund must have either at least 50% of the fund’s assets linked to active members who are residents in Australia or not have any active members.
If you are a single member of a SMSF, you should ensure that you have a valid enduring power of attorney. If you are moving overseas, you should speak to a solicitor about whether your SMSF would still comply with the three tests. Please contact Etheringtons Solicitors if you have any questions about your SMSF by using the contact form or calling us on (02) 9963 9800.