Practitioners looking at ensuring an SMSF trust deed includes provisions to receive compensation amounts should check the document also covers events after the fund has been wound up, a superannuation lawyer has noted.
DBA Lawyers director William Fettes pointed out given the Compensation Scheme of Last Resort (CSLR) dealt with losses related to personal financial advice, dealing in securities and credit provision, SMSFs could receive funds from it even after having been shut down.
“At this point, things might have gone really pear-shaped. Not only is there a loss in relation to SMSF investments, the trustee might have gone to AFCA [Australian Financial Complaints Authority], which has made a determination, but they can’t get blood from a stone. So, there’s no other recourse and they had to go to the CSLR,” Fettes said during a briefing late last week.
“One of the key points here for advisers who want to prepare for this is to make sure the SMSF deeds they’re using handle that [situation] appropriately in terms of trustee powers and distribution of amounts that might be received by the fund, particularly where it might have been wound up or in the process of being wound up.
“We want [the deed] to have appropriate powers and rules for seeking and recovering compensation and also distributing recovered amounts, including to former members or other appropriate parties.
“It may be the super fund is wound up at this point, so it’s the former trustee doing things and we want to provide clear authorisation to act, even if the trust has come to an end.
“What might that look like? Well, provisions permitting a concept of a residual amount and if you get a compensation payment post wind-up, the trustee is on clear territory to deal with that.”
According to Fettes this would mean allowing distribution of the compensation to former members or their legal personal representatives, as well as authorising the trustee to initiate claims, engage advisers and incur costs in pursuing compensation.
“Since this [compensation for SMSFs] is comparatively new, you are unlikely to see it in all deeds around the place yet, but [it’s] definitely worth looking for and asking the question,” he added.
