Small Australian Prudential Regulation Authority (APRA) funds (SAF) could be a viable alternative or exit strategy to SMSFs and had the added benefit of removing or minimising conflict between family members, according to a technical expert.
Australian Executor Trustees senior technical services manager Julie Steed said SAFs could provide a solution that was superior to an SMSF, such as in unique family situations.
Steed said essentially a SAF was an SMSF with a professional, independent trustee and also retained the same legislative flexibilities as an SMSF but without the compliance obligations.
“This is one [benefit], particularly in respect of winding up a fund as a result of death, because we’re seeing more and more instances of dysfunctional families,” she told the SMSF Association NSW Chapter Breakfast in Sydney last week.
“If I have a situation where one of my children has a drug or gambling problem, if I died and they were to exert influence over the surviving trustee to access the money, you can be quite successful with a baseball bat going through a window at two o’clock in the morning.
“But if you have a professional, independent trustee, this doesn’t work.
“So sometimes these small APRA funds provide a really valuable solution there because it’s about taking away that ability to create conflict within a family.”
Another benefit of using a SAF was that clients did not have access to cheque books under that structure, she noted.
“There is a bank account but there are no signatories to it, so you, as the professional, have access to the account and place the trades and the trustee automatically settles them,” she said.
“But clients don’t have access to anything themselves, so they don’t have access to a cheque book.
“For a lot of practitioners, that’s actually a powerful thing because you might have clients that genuinely get confused or muddled up about which account is which, particularly when things get difficult, perhaps their business is failing, the temptation to just take some money out of the SMSF is too great and, quite frankly, you can understand the thought process that people go through.
“So for some, this [feature of a SAF] will be really valuable.”
