A recent case heard in the New South Wales Supreme Court has confirmed a former SMSF trustee can complete the sale of a trust property while in administration, as long as the sale does not harm the fund and its members consent to the transaction, according to a superannuation lawyer.
The case, Re Absolute Vision Technologies Pty Ltd (subject to deed of company administration) [2024], centered on a situation where the former corporate trustee of an SMSF, Absolute Vision Technologies (AVT), was replaced in 2017, but failed to transfer legal ownership of a property, suite 901, to the new trustee.
When AVT went into administration in 2024, it had already signed a contract to sell suite 901, which it still held in trust for the SMSF. This raised concerns about whether AVT, as the former trustee, could complete the sale while in administration.
While the land title of the property did not reflect AVT had originally held the property as trustee for the SMSF, the financial records and the sale contract showed it had been purchased using fund assets.
The court also considered AVT’s obligation under the deed of change of trustee, which required AVT to transfer the property to the new trustee, and the potential breach of trust that had occurred.
Commenting on the case, Sladen Legal senior associate Terence Wong noted: “The court ultimately held that although the sale would be in breach of trust, that completing the sale would not prejudice the SMSF or its members, who had given their informed consent to the sale, and that a failure to complete the sale would expose AVT to claims under the sale contract and under the problematic lease arrangement.
“Therefore the court granted the direction that AVT was justified in completing the contract of sale for suite 901.”
Wong added the ruling also found AVT was justified in distributing the net proceeds from the sale of the property to the new corporate trustee, rather than paying the funds into court.
“The case provides some relief that SMSF assets can be protected from the trustee’s personal administration issues. That said, if the title had been appropriately transferred to the new trustee back in 2017, then there would have been no need for the time and expense of seeking a court direction,” he noted.
“This case also reinforces the benefits of having a stand-alone corporate trustee for an SMSF.”
