July 2013 Newsletter 

In this edition:

Welcome

New ATO determination on correcting GST mistakes

Reportable Superannuation Contributions

What to do when you haven't met your super obligations

Superannuation and Powers of Attorney: Part 2

In Part One we considered what an enduring power of attorney is and what they can do. We now look at when it is useful to have an attorney. In the third part of this series we will look at when your attorney can't be trustee of your fund.

When is having your attorney act in your place useful?
The most obvious time when you might have your attorney act as trustee of your fund in your place is when you get older. In the extreme, an attorney will be essential if you ever suffer from dementia or some other mental illness that means you are incapable of making your own decisions on legal matters. Of course, sometimes in those situations the family will wind up the self managed superannuation fund. However, if just one member of a couple has dementia and (say) the spouse is keen to keep the fund running there would be no barrier to doing this.

In the ideal world, an enduring power of attorney would be granted before loss of mental capacity and the attorney would take over as trustee at some suitable time, preferably before loss of capacity. 

The key benefits here are that the fund can continue even when one of the members is no longer able to run it. Given that self managed funds are often extremely cost effective, offer substantial tax benefits and estate planning flexibility this can be enormously valuable to the family's wealth management.

It is even a way of allowing (say) adult children to run their parents' fund into very old age as a tax effective means of providing for their parents' income needs.

However it is not only old age or mental incapacity that might prompt you to think about appointing an attorney and having that person act as trustee of your fund.

Several other circumstances include:
If you move overseas. Your self managed superannuation fund only gets the usual tax concessions if it is an Australian resident fund. There are several tests to meet here but one of them is that the fund must be managed and controlled in Australia. Often people who move overseas – even if they ultimately intend to come back but are nonetheless planning to be away for an extended period – will grant an enduring power of attorney and have their attorney take their place as trustee.

If you travel frequently. Others who consider this option are those who are frequently away. As well as being unable to manage the routine record keeping and correspondence in relation to their fund (which is something they could outsource / delegate to another family member or friend without resigning as a trustee) they are also not confident they will be able to respond to more important issues in a timely fashion. For example, they might not be able to review and sign the fund's returns, review the fund's investments etc.

If you are concerned about external pressures that might cause you to manage your fund inappropriately. Some examples here might include problem gamblers, those who are concerned about family pressures to share their wealth etc. In each case, they could certainly wind up their self managed fund and place their savings in the hands of a professional trustee. This would in fact probably be the most common approach. However, there are certainly some situations where retaining the self managed fund but putting some distance between the member and the trustee is appropriate.

One final point to note here is that trustees of self managed funds cannot be paid for performing their trustee role. This is generally not an issue when you are the trustee of your own fund. It is something to bear in mind, however, if you ask another person such as your accountant or solicitor to take that role. While they could continue to charge for their accounting or legal work, they could not charge for what is possibly quite a time consuming and onerous job – acting as trustee of your superannuation fund.

Read Part Three of our series from the August 2013 newsletter.

If you have any questions about how this information relates to you and your family, please contact us.