The ALRC paper proposes changing the SIS legislation in order to prescribe certain arrangements for the management of SMSFs where a trustee loses capacity.
It has also proposed introducing a requirement for all trustees to have a corporate trustee.
Greenfields SMSF Lawyers senior counsel Caroline Harley said prescribing particular arrangements for loss of capacity would protect many SMSFs from becoming non-compliant, but there’s a counter argument that members or trustees should already have a plan in place.
“It would be more practical to have the trust deed override any default arrangements so that if trustees did already have a plan in place, any proposed changes didn’t override that,” Ms Harley said.
The paper also proposed additional compliance obligations for trustees and directors where they are not a member of the fund and to award the Superannuation Complaints Tribunal jurisdiction to resolve complaints involving SMSFs.
Concerns about off-the-shelf products for the establishment of SMSFs, including standard trust deeds and corporate constitutions, were also flagged in the paper.
It proposed placing restrictions on those who may provide advice on and prepare documentation for the establishment of SMSFs.
Binding death benefit nominations are a particular focus in the paper, with the ALRC suggesting that the BDBNs should have the same requirements for witnessing that wills have.
“While the SIS regulations already contain similar witnessing requirements, the ATO’s SMSF Determination 2008/3 states that SMSFs do not need to comply with these provisions,” Ms Harley said.
She said that many of the proposals to protect against elder abuse can already be adopted by incorporating relevant provisions in the SMSF trust deed without any change to legislation.
“The proposals could mean that some level of protection would be provided regardless of the terms of the trust deed.”