BDBNs, Compliance, Documentation, SMSF

Take proactive steps for lost documents

Lost SMSF documents

SMSF trustees and advisers should consider establishing a new SMSF in the event key operating documents can no longer be found.

An SMSF lawyer has instructed practitioners and trustees to reboot their SMSF if they have lost vital trust deeds or significant documents linked to its operations.

“If there are issues with the document trail, such as [you] cannot produce all prior deeds fully executed and in original, or if there’s issues with the change-of-trustee document, establish a new SMSF with a brand new sole purpose corporate trustee,” DBA Lawyers special counsel Bryce Figot told attendees at an SMSF legal update last Friday.

“In addition, roll all assets to the new SMSF. Now that’s probably going to cause capital gains tax, potentially stamp duty and if you’ve got assets in there other than cash, listed securities and business real property, those other types of assets need to be liquidated first.

“I acknowledge that establishing a new SMSF and rolling over assets is infinitely easier and cheaper said than done, but that’s what gives you the greatest certainty, particularly if you do that before there is a dispute.

“Remember that should occur prospectively while everyone is alive and with capacity.”

Figot provided an example of a recent court case in Victoria where a superannuation fund lost its original deed, leading to questions about the validity of the deed and the binding death benefit nominations made by fund members to their adult children.

In this particular case, the court determined the deeds of confirmation provided by the fund were a valid solution in the absence of the original trust deed.

Figot reminded SMSF practitioners that taking proactive action is beneficial when resolving the issue of misplaced documents in a fund.

“Lost documents always represent risks and I know clients are often slow to recognise these risks as worth actioning. However, if you are proactive, that tends to get you a better result,” he said.

“For practitioners, if documents are lost, write to the client and strongly encourage them to get a lawyer’s input. If there is no dispute yet, the most certain solution is to ‘kill off’ the existing SMSF and roll to a new SMSF. Of course, clients are reluctant to do this due to tax and other costs.

“Confirmatory deeds are likely to count for something, but they are not a definitive slam dunk. If a proactive court application is made, so long as an exhaustive search has been made and documented, it seems quite likely that you will get a positive outcome from the court.”

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