Changing an SMSF from an individual trustee to a corporate trustee structure requires accuracy as mistakes could come back to hit advisers, an industry solicitor has warned.
“We frequently see cases where clients attempted to, but failed to, effectively change the trustee of an SMSF,” Townsends Business & Corporate Lawyers solicitor Jeff Song revealed.
“This can not only cost you further legal fees in order to rectify the issue later on, but also may be subject to ATO penalties and adverse tax consequences.”
Song said unfortunately there was no rule of thumb when it came to appointing a new corporate trustee.
“Depending on the circumstances, it may not be sufficient to establish a company and prepare trustees’ minutes to state that the company is now the new trustee,” he noted.
“The current trust deed of the fund should be reviewed to see if it specifies any requirements on how to resign the current trustee(s) and appoint a new trustee.
“It may require that the change only be effected by a formal deed and/or it may require a third party to consent to the change.
“If the current deed is silent on the issue, the relevant state’s or territory’s legislation needs to be relied on.”
Once the legal requirements are confirmed, a company needs to be established, bearing in mind a special purpose company can access the benefit of a discounted annual Australian Securities and Investments Commission review fee, he said.
He added it was also important to appoint the members of the fund as directors, or secretaries, of the company and to otherwise ensure the fund complies with the super law, most particularly the Superannuation Industry (Supervision) Act.
“Once the company is set up, the required legal instrument should be carefully drafted and executed to ensure effective change of a trustee,” he said.
“Note that the change requires effective resignation or retirement of the current trustee(s), as well as effective appointment of the new corporate trustee.”
He said following the execution of the documents, the ATO must be notified of the change within the prescribed time frame, which is within 28 days of the change.
Each director of the new corporate trustee must also sign a trustee/director consent form and the ATO trustee declaration form.
“The declaration form must be signed within 21 days of the directors being appointed and the form must be kept on the register of the fund,” Song noted.
“Also, all assets of the fund must be transferred to the new trustee as required by the ATO.
“If the fund has real estate, there will be further procedural and legal requirements, such as applying for exemption/concession of transfer duty to the relevant state’s revenue office – if required by the relevant state’s or territory’s duties law – and applying to the land titles office to have the property transferred to the new corporate trustee.”