Companies acting as the trustee of an SMSF may run into issues that could be difficult and costly to resolve if their status becomes deregistered, thus this scenario should not be treated lightly, an industry solicitor has warned.
“Many SMSF trustees are still unfamiliar with the consequences of deregistering a company, especially when it’s been acting as an SMSF trustee,” Townsends Business & Corporate Lawyers solicitor Jeff Song said.
“Upon deregistration of a company, it can no longer do anything in its own right and loses its right to own property.”
Song said in such an event, the commonwealth normally takes legal ownership of all trust property in the name of the deregistered company and legal ownership of non-trust assets is vested in the Australian Securities and Investments Commission (ASIC).
In order to resolve this, an application to ASIC or the Supreme Court can be made to reinstate the company, where reinstatement will restore a company to the registered status as if it were never deregistered, he said.
“Reinstatement can be difficult and costly, so a different way of dealing with the issue is to simply change the trustee of the fund – this will depend in part on the current terms of the SMSF trust deed,” he noted.
“It may even be possible to effect a change of trustee of the SMSF and to simply transfer all trust property to the new trustee.
“This transfer is likely to be more complicated when the property is land.
“Queensland, Victoria and Western Australia allow such transfer application to be made direct to the relevant state’s title office. In other states, application for transfer needs to be made to the commonwealth, who has the legal ownership of the trust assets of the fund.”
He also noted compliance issues as it is a requirement under superannuation law that all members of an SMSF are either appointed as trustees or directors of a corporate trustee.
If no replacement trustee is appointed prior to or at the time of deregistration of the corporate trustee, there is a risk of the fund being declared a non-complying fund, which may have detrimental tax and other penalty consequences for the fund, he added.
Further, the directors of any company considering deregistration should seek specific legal advice from specialist lawyers before deciding to voluntarily deregister a company, he said.
“This is particularly so where the company is acting as a trustee of a fund. The most important thing to consider in any deregistration is what the past assets held by the company were and whether those assets have all been properly transferred elsewhere before the deregistration was sought,” he said.
“In some instances, ASIC may initiate and deregister a company, that is, when the company has not paid its annual review fee within 12 months of the due date or if the company has not responded to a company compliance notice.
“It is important therefore to ensure the company meets its regulatory obligations, including to pay its annual fee and comply with all notices from ASIC. For this reason, directors also need to keep the company’s registered address up to date.”
