SMSF Association head of policy Jordan George says the association is not convinced that additional and stronger legislation will result in increased protections against elder financial abuse.
“Rather, we suggest that education for trustees and advisers on planning for the loss of capacity is the first step to reducing the risk of elder abuse occurring in the SMSF sector,” Mr George said.
He said the arrangements if a trustee loses capacity are prescribed by law by nature of its application.
“The association is wary that prescribing them step by step in the legislation would be an unnecessary and exhaustive process that would not solve the issues the paper discusses. Therefore, we believe education of trustees and advisers is a more effective approach.”
The SMSF Association is proposing that SIS regulation 4.09 is amended to mandate that the trustees of the fund formulate and regularly review the consideration and planning of the loss of capacity and SMSF exit strategy as part of their investment strategies.
“Our proposed amendment is similar to the recent addition to the SIS regulation 4.09 (2)(e) that requires trustees to consider whether they hold insurance. This has had great success in putting insurance to the front of every trustee’s mind and will have the same effect with estate and succession planning,” Mr George said.
“Furthermore, it then becomes a legal requirement that trustees consider estate planning and this becomes part of the audit standards that SMSF auditors must see evidence of when auditing funds each year.”
Mr George said there also needs to be greater awareness and education about the legal risks surrounding poorly constructed and executed binding death benefit nominations (BDBN) to encourage trustees and their advisers to get legal advice on BDBNs.
He said people appointed under an enduring power of attorney should only be able to make or renew a BDBN for a member if expressly authorised to do so by the enduring power of attorney, and the same rule should apply for reversionary pensions.
“The association believes that the ongoing uncertainty around the application of the BDBN provisions is an emerging risk for the SMSF and broader superannuation sector as the system matures and Australia’s population ages.”