SMSF auditors and trustees must be clear about who holds an asset within a fund and that even sole purpose corporate trustees need to be set up correctly to ensure clear lines of ownership, according to an SMSF audit specialist.
ASF Audits head of education Shelley Banton told attendees at today’s SMSF Association Audit Day 2024 that assets held in the name of a trustee only, and not in the name of a fund, would breach Superannuation Industry (Supervision) Regulation 4.09a as they were not being held beneficially on trust for the fund.
Banton added that even the use of a corporate trustee did not completely solve the problem of the assets being held in the name of the trustee rather than an SMSF.
“There are a few things to consider and the first one is is it a multi-purpose corporate trustee and does it act in other capacities?” Banton said.
“In this case we can’t actually take the name of the trustee only if it’s not held beneficially for the super fund. We don’t know if there will be a claim on assets due to other entities being pursued and that asset may be taken because there’s no pathway for it to go to the super fund.”
She added an asset could be held in the name of a trustee, but required the use of a sole purpose corporate trustee, and warned specific attention be paid to their creation.
“Some auditors take the fact that because there is a lower ASIC (Australian Securities and Investments Commission) fee applied, that it’s a sole purpose corporate trustee, but that could be a mistake because when trustees are setting up the corporate trustee it’s tick a box on the ASIC form and you don’t need to provide any evidence to prove that it’s a sole purpose corporate trustee,” she said.
“A lower ASIC fee doesn’t result in a sole purpose corporate trustee and you can go to the ABN Lookup website and see the trading names and history and it doesn’t add up.
“The only other way to make sure it’s a sole purpose corporate trustee is to get a copy of the constitution and there has to be a very specific rule which says that none of the income or the capital of the company can be distributed to the shareholders.
“It should also state the company only acts as a single purpose corporate trustee, not that it may act as a sole purpose corporate trustee, but it only acts in that capacity.
“So you need to get the constitution, put it on file and then you’ll be able to determine the company does nothing else and that asset belongs to that particular super fund.”
