A sector specialist has reminded practitioners of relief provided in the Superannuation Industry (Supervision) (SIS) Act when trustees are in breach of the rules defining their duties in the running of an SMSF.
“[There is a rule] within SIS that basically says even though you might on the face of it not meet these SMSF trustee rules, because something has happened … you’ve got a six-month window that opens up [whereby] you’re deemed [to have met] the SMSF trustee rules,” Heffron SMSF technical and education services director Leigh Mansell noted.
“So as long as you fix [the issue] within the six-month window, you roll forward and you’re deemed to [have] a self-managed fund that meets the rules, no problems.”
Mansell pointed out there is no formal nomination trustees are required to make when looking to take advantage of this SIS Act provision and also the generosity attached to the avenue of relief.
“[If] something happens a few year later [indicating the SMSF trustees have broken their governing rules again], you get another six months to fix [that problem],” she said.
“So it’s not a once-off [measure] per fund, there is no election to be made, it’s just this window that opens every time you’ve got a set-up that doesn’t meet the trustee rules.”
Further, she identified some circumstances where the use of this SIS Act provision could be of significant benefit to SMSF trustees.
“This could be really, really valuable for lots of reasons, but one of them could be when we’re dealing with a disqualified person,” she suggested.
“This is because it is illegal for them to act as a trustee or director … but they can stay a member of the fund for six months. So you’ve got a bit of wiggle room in terms of timing to get rid of them from the fund.
“So that can be valuable breathing room [for trustees].”
