The old maxim that “knowledge is king” has never been truer than when it comes to SMSFs. Ask any accountant or financial planner who has worked in the SMSF industry and they’ll know from first-hand experience the laws are tough, complex and can easily turn into a disaster for the unerring SMSF trustee in breach of those laws.
Those on the legal side of the SMSF industry are consistently faced with thousands of pages of legislation, rulings and guidelines across the family law, bankruptcy, stamp duty, taxation, superannuation, corporations law and banking acts, and have to bring all these resources together to advise or help an SMSF trustee in trouble. So where do the trustees sit in this mass of information? Well the commissioner of taxation has consistently said there is an onus and responsibility for SMSF trustees to keep up to date with current laws, any new laws and their fund’s trust deed. With hundreds of thousands of breaches of the contribution caps over the years, it is not easy for SMSF trustees to get it right and to monitor their superannuation affairs in detail despite the commissioner’s wishes. And with the new penalty system that applies from 1 July 2014 where the commissioner of taxation can issue penalty notices like speeding tickets, expect a lot more SMSF infringement notices to take over from contributions caps as the big ATO revenue earner. So where are we with SMSF trustee knowledge and education? Let’s look at a couple of cases.
Clearly the law is tough and smart accountants can get it wrong
In APRA (Australian Prudential Regulation Authority) v Holloway [2000] FCA 579, senior partner and accountant Stanley Holloway was tried personally for advising his clients to use an arrangement that was held by the Federal Court to be a breach of section 85 of the Superannuation Industry (Supervision) Act 1993 – the anti-avoidance rules on the in-house assets test. The court said “it is also extraordinary that, although he said he knew in a vague way of some prohibition or restriction upon a superannuation fund investing in, or lending to, an employer-sponsor, he did not take the trouble to check the provisions of the act or to discuss that issue with anyone”. Clearly ignorance of the law is no excuse for the professional.
And even smart trustees get it horribly wrong
Witness what happened to the solicitor trustee in Munro v Munro [2015] QSC 61, who objected to his financial planners having to pay for a review of the 2004 trust deed and instructing them to provide the paperwork to give effect to the binding nomination of Mr Munro in favour of “Trustee of Deceased Estate”. Of course, it all turned into a nightmare when the court ruled the trustee of the deceased estate cannot receive a binding death benefit nomination. And the deceased trustee was a solicitor. Worse still, he did not want to upgrade his deed or nomination because of the costs.
So where does the trustee fit?
The Australian SMSF Members Association (ASMA) gets many calls from members who have made a mistake and need help dealing with the regulatory or government authorities. Most of these SMSF trustee members are either doing it themselves or their accountant or administrator does not provide advice or has provided poor advice. If the smart accountants and the smart lawyer SMSF trustee cannot get things right, what hope is there for the SMSF trustee with no adviser or poor advice?
ASMA and education
There are a number of good information sources for trustees and some great education and knowledge pit stops. For instance, the publishers of selfmanagedsuper produce a newsletter for trustees on a monthly basis, bringing them the latest news affecting the sector. In addition, the ATO has produced various animated videos and a multitude of publications enabling trustees to stay informed and up to date.
For our part, ASMA continues to provide ongoing education to its members through webinars, articles, our website and emails, and our national conference will be held in February 2016. We are building knowledge forums and networks enabling our members to get together, learn and grow and be part of an important SMSF knowledge network for trustees.
This drive from the ground up is designed to encourage trustees to know more about their SMSF – a super fund that, through their choice, will take them and their spouse to the end of their lives. ASMA regards this as an important part of being an SMSF trustee, and, from member feedback, a vital part – more so than the big-stick approach to penalising compliance breaches. For more on ASMA initiatives, go to www.smsfmembers.com.au.
