Funds struggling to obtain information about an investment in a unit trust for audit purposes can and should exercise their rights as a beneficiary to that knowledge, an SMSF legal specialist has advised.
DBA Lawyers special counsel Bryce Figot said SMSFs that have invested in a unit trust are entitled to data they may not be receiving and should directly ask for it where those documents are required by the fund’s auditor.
“The SMSF is a unitholder and a beneficiary of the unit trust and beneficiaries have rights,” Figot noted during a panel discussion on SMSF audits at The Tax Institute’s recent Super Intensive.
“So all sorts of trust document information, including governing rules, financials, income tax returns, even privileged advice to the trustee of the trusts, is typically not privileged for the beneficiaries of the trust.
“In an extreme situation, not that I see this happening too often, the trustee of the SMSF should be asserting all of their rights as a beneficiary of the unit trust to that information.”
He added in cases where an SMSF has to deal with a third-party accounting firm used by the unit trust that is not supplying the requested information, the fund should bypass it and go directly to the trustees.
“If the accounting firm refuses to provide the information, remember the obligation is on the trustee of the unit trust and they have fiduciary obligations to the beneficiaries,” he explained.
“So in that case forget the accountant. In a practical sense it’s often the accountants who make these decisions, but the SMSF as beneficiary can contact the trustee of the unit trust and assert their rights to that information.
“In an extreme situation you could even make an application to the Supreme Court to say: ‘I’m a beneficiary and have a right to ensure that there’s proper administration of the trust and I need these trust documents.’”
