The new legislation, effective as of 1 September, specifically prohibits attorneys from entering into conflicted transactions unless they have obtained prior consent from the principal – that is, the member of the fund.
Solicitor at Townsends Business & Corporate Lawyers, Julie Hartley, explained that conflicted transactions are those which do or have the potential to bring the attorney’s duty to the principal into conflict with the interest of the attorney, or other associated persons of the attorney such as relatives or business partners.
Examples which are “not uncommon” in the SMSF context but are likely to involve conflict could include the attorney making a binding death benefit nomination for the principal (as member of a super fund) in favour of the attorney; the attorney amending the nomination to remove beneficiaries and nominate the attorney in their place; or the attorney cashing out the principal’s benefit before their death.
“In anticipation of these scenarios (and others), a principal/member will have to carefully consider from the outset how much flexibility and power in relation to their superannuation fund they wish to give their attorney,” Ms Hartley said.
“Once the decision has been made, the enduring power of attorney documentation must be drafted to expressly outline which potentially conflicted transactions the attorney is authorised to enter into on behalf of the principal.
“If the attorney is unable to demonstrate they had the prior consent of the principal, their actions could potentially be found in breach of the new legislation and held to be invalid.”
Existing EPOAs are grandfathered under the new legislation and remain valid.