The registration status of an SMSF trustee company should be reviewed annually by advice practitioners to avoid directors having to take legal action to reinstate it in the event the annual fee has not been paid, according to DBA Lawyers special counsel Bryce Figot.
Figot said a failure to pay the annual Australian Securities and Investments Commission (ASIC) review fee would lead to a trustee company being deregistered, but would not result in an SMSF losing its assets or failing to have a trustee.
“This question was considered in a case called McCabe v The Baltins Superannuation Fund [2017] NSWSC 1671,” he said during a briefing held by his firm last week.
“The answer to the question [of whether the SMSF was without a trustee] was no.
“Why? Because when the company in that case was deregistered in 2015, the statutory regime applicable under the Corporations Act made the commonwealth the trustee of the fund, but the commonwealth has delegated that ability to ASIC. So really, ASIC is the trustee of the SMSF.”
He noted it was relatively easy to reinstate the company by applying to ASIC for that to occur and paying any outstanding fees, but this process did not apply for an SMSF when a director of the trustee company was no longer available.
To illustrate this, he gave the example of the sole director of a trustee company of an SMSF who due to advancing age forgets to pay the ASIC annual review fee, leading to the deregistration of the company, after which the director dies, leaving the executor to deal with the fund.
“You can apply to ASIC to reinstate the trustee company, but you know what it is going to say? ‘Go to court. We won’t do it,’” he added.
“According to ASIC Regulatory Guide 83, they will not reinstate a company where on reinstatement the company would not have a director as there would be nobody to manage the company’s business, and this may be because the directors are now deceased, so an application may be made to a court to reinstate.”
He pointed out these events were more likely to take place with older clients who can overlook paying the annual ASIC review fee and encouraged practitioners to take proactive steps to prevent it.
“Closely monitor your clients, especially the older ones, and regularly, that is annually, check the ASIC register to make sure no one has forgotten to pay fees and make sure the company has not been deregistered,’ he stated.
“You can also prepay ASIC fees and if you do, you’ll get a discount if you prepay your annual review fee for a 10-year period in advance.
“It’s really important to keep the company, especially as people get older with clients who lose touch with you or stop being responsive because they might be struggling with capacity.
“Keep that company registered because if it gets deregistered and/or they die and there’s no living directors left, it is a nightmare.”
