Administration, Compliance, SMSF

Rollover objections cannot be ignored

SMSF rollover objections

SMSF trustees cannot ignore a member’s objection to a rollover and should seek legal advice even if the trust deed allows for the transfer.

SMSF trustees facing objections to a rollover from a member when winding up a fund should not continue to act but seek legal advice as there are no superannuation regulations that address this type of event, an SMSF administrator has warned.

Heffron senior SMSF technical specialist Annie Dawson said it was not uncommon for SMSF trustees to find a member will not consent to a rollover to another fund and this effectively prevented any further action in transferring their interest in the SMSF.

“Without member consent, trustees are not allowed to move benefits on in any way,” Dawson said during a recent SMSF wind-up briefing.

“The trustees can’t roll it to the ATO as there is no concept for SMSFs to access an eligible rollover fund vehicle as they don’t exist anymore.

“Trustees also can’t say a member is not active or they can’t be found or have got a low balance.

“Unlike Australian Prudential Regulation Authority-regulated funds, SMSFs don’t have access to those rules, so unfortunately it is a stalemate in cases when we don’t have member consent.”

Speaking during the same briefing, Heffron head of education and content Lyn Formica added the only solution was to engage legal advice even if the SMSF trust deed made provisions to roll over member funds without their consent.

“The winding-up and rollover process should follow the requirements of the trust deed, but if you had a deed that said member benefits can be rolled over without their consent, you are breaching the super law to do that. Despite the deed allowing you to do that, if the super law stops it then you certainly still have an issue,” Formica said.

“In that situation you really need legal advice because you don’t want the person who is not engaging with the fund to feel they have been disadvantaged by their benefits being rolled over.”

During the briefing, Dawson also warned trustees not to cancel their SMSF’s Australian business number as part of the wind-up process and Formica noted a fund did not need a zero balance to be be viewed as materially wound up by the ATO.

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