SMSF trustees wishing to ensure their fund meets the central management and control (CMC) test while they are overseas for an extended period and do not wish to add resident members should consider delegating their duties to a third party, a technical specialist has advised.
BT technical services technical consultant Tim Howard said in the event SMSF trustees did not want to expand the number of members in their fund so the majority were in Australia while they were overseas, they were able to delegate duties under law to another party.
Howard said this process was similar to appointing a legal personal representative under an enduring power of attorney (EPOA), but was less well-known as it took place under trust laws.
“The ability to delegate someone else to perform the duties of an individual trustee sits under trust acts, which are state-based legislation, and so differ from state to state in their abilities to allow delegation,” he said during a recent webinar on SMSF residency rules.
“From my latest readings on this matter, it is not something that somebody in NSW and the ACT could use, as there are issues with the trust acts in those states, and someone can only delegate trustee duties for up to two years, so it would only be a temporary absence anyway.”
He said the same was possible under the Corporations Act for those funds with a corporate trustee and director duties could be delegated to someone else while a director was overseas.
This was similar to using an EPOA in place of an individual trustee or the director of a corporate trustee, but the delegation option with a corporate trustee had some advantages, he noted.
“Delegating duties might be a little bit easier than appointing an attorney because you can change the delegation much quicker than you can change an EPOA that someone might have,” he said.
“In the case of delegating duties as an individual trustee, this can be an issue if you lose capacity while overseas where that delegation may not be able to continue, whereas a delegation under the Corporations Act can continue.”
At the same webinar, he warned SMSF trustees who leave Australia for an indefinite period but return before two years will be considered as not meeting the CMC test as they had no initial plan to return.
