In the latest episode of “Feeling Smarter,” a weekly video series by Smarter SMSF, hosts Aaron Dunn and Tim Miller unpack the intricacies of Self-Managed Super Funds (SMSFs) following Aaron’s session at the SMSF Association National Conference.
This blog serves as a reminder of the issues that may restrict fund trustees from optimising their SMSF journey, addressing common concerns that have arisen from ongoing process changes that impact the management of SMSFs from establishment through to the payment of death benefits.
Recent changes with SMSF establishments
There have been significant changes in establishing SMSFs over recent years, such as corporate trustee regulations, director identification rules, electronic document execution, and super stream updates. It is important to adapt to these changes for efficient SMSF management, including the establishment and amendment processes within a fund.
A critical element in the SMSF journey is dealing with later-life issues such as incapacity and disputes among fund members, which could affect decision-making and membership within the fund.
In the video, Aaron and Tim explore a question from the conference about a member who wishes to leave the fund and has ceased to be a trustee or director but still holds a balance within the fund. Membership is inherently linked to having a balance in the fund, and thus, it is not possible to exit as a member, nor trustee/director, while retaining a balance.
This leads to an exploration of the definition of membership under the SIS Act and Regulations and the importance of aligning the SMSF deed with the act and regulations. Importantly within the Smarter SMSF deed, membership is defined based on balance, emphasising the necessity of trustee decisions in membership cessation.
Complexities in the cessation of a fund member
Another issue that is discussed involves the complexities of non-cooperative trustees or members wishing to exit the fund. Here, this issue stresses the significance of trustees understanding the decision-making powers outlined in the fund’s governing documents. You can end up with scenarios where members could potentially influence decisions disproportionately, either through majority voting or control over fund assets, underscoring the importance of aligning the constitution, for funds with a corporate trustee, with the SMSF deed to ensure coherent decision-making processes.
The challenges of removing uncooperative members means in some cases, court intervention might be necessary. This highlights the complexities of SMSF governance, especially in situations involving disputes or the need for member removal.
In summary, this week’s show underscores the importance of strategic planning and legal compliance in managing SMSFs, particularly in the context of succession and capacity issues.
We will further explore these topics in our upcoming SMSF days, emphasising the need for fund trustees to stay informed and proactive in navigating the evolving landscape of SMSF management.
