SMSFs with a corporate trustee that have appointed a corporate power of attorney (CPOA) should be aware it will not satisfy any requirements under the Superannuation Industry (Supervision) (SIS) Act, including the appointment of a trustee director.
SuperConcepts senior SMSF technical specialist Anthony Cullen said the creation and use of CPOAs was allowed under state-based trust laws, as well as the Corporations Act, but had very limited interaction with the SIS Act when dealing with SMSFs.
“My understanding is that the appointment of a CPOA is at a company level, not the individual director’s level. It is not an enduring power of attorney (EPOA) and is akin to a principal/agent relationship,” Cullen said, adding that relationship only occurs between the donor company, not its directors, and the attorney.
He added that section 17A of the SIS Act covered the requirement to meet the definition of an SMSF, including the general principle that members equal trustees or directors of a corporate trustee and vice versa.
“The act is clear that the legal personal representative for a member that may still be alive needs to be granted an EPOA in respect of the member. That is, a general POA will not be sufficient to satisfy the requirements of section 17A(3)(b)(ii) of the SIS Act,” he said in a recent blog.
“An attorney who holds an EPOA in respect of the member may act on behalf of the member, but this does not extend to acting in the capacity of trustee/director.
“How does such an appointment [as a CPOA] satisfy the requirements of section 17A and the regulator’s view that the appointment cannot be as an agent? In short, I can’t see that it does,” Cullen said.
“How does the [CPOA] appointment consider the relationship back to the member as required by section 17A? Again, I can’t see that it does.”
He said while a CPOA may have a place in an estate or succession planning strategy, corporate trustees looking to use one should consider what they were trying to achieve from an SMSF structuring perspective, given a CPOA only enables someone to act on behalf of the company and not in the role of, or for, a director.
“What are you actually looking to achieve? Make sure any action solves the issue, or potential issue, you are looking to address and, at the same time, does not create unintended consequences,” he said.
“Over the years, there has been an increase in recognition that who controls an SMSF is potentially more important than a binding death benefit nomination. It would be prudent to bear this in mind if considering appointing a CPOA. What powers are you deferring to them and who has ultimate power if not you?”