For some Trustees who are going overseas but would still like to manage an SMSF in Australia, they can give someone the Power of Attorney (POA).
Firstly, Trustees need to ensure that they definitely do not satisfy the residency requirements set up by the Tax Office. If Trustees do satisfy the requirements, a POA is not required. If Trustees do not satisfy the residency requirements, they can appoint a POA by following the steps below:
- Elect someone who is a resident of Australia to be appointed as a POA
- The elected individual will need to complete a Trust Deed addendum/Minutes of Meeting, Consent to act as Trustee/Director and a Trustee Declaration.
- If the Fund has a Corporate Trustee, the Directors of the Corporate Trustee will need to inform ASIC of the change. The POA will need to be added into the Fund as an Alternate Director
- Inform the Tax Office of the appointment of the POA.
For more information on the Tax Office’s requirement when appointing POA, please see the link below:
If you are a client of ours and you elect to implement a POA, we will send you the above mentioned documents to be signed and we will update the appointment of the POA with ASIC and the Tax Office on your behalf.
Private Ruling on Residency Status and EPOA
We applied for a Private Ruling on an SMSF where the Members moving overseas appointed power of attorneys before leaving Australia. The Private Ruling resulted in a positive outcome and the Fund continued to remain compliant as long as the Members meet the three residency tests. Below is the sample of the Private Ruling:
Enduring Power of Attorney (EPA)
An Enduring Power of Attorney (EPA) is an important legal document that ensures if you loose your mental capacity through injury or the onset of a medical condition then you have someone in a position of trust to protect your assets and to take care of your affairs.
An EPA is especially important if you are a Member of an SMSF. Generally, if you are a Member of an SMSF, you must also be a Trustee (or a Director of a Corporate Trustee). Where a Trustee loses mental capacity, then the position of the Trustee may become vacant. As a result, the SMSF may risk becoming non-compliant by the ATO unless the Trustee either rolls over the incapacitated Member’s benefit to a retail fund or appoint for a new Trustee. Rolling over the Member’s balance into a retail superfund can have tax consequences (such as CGT and Stamp Duty) and can also lead to practical difficulties – for instance, the assets held within the SMSF may need to be sold and liquefied in order to transfer the benefits to a retail fund.
However, if the Member has appointed an Enduring Power of Attorney, a person holding an EPA is authorised to act in the Member’s place as a Trustee. As long as the replacement Trustee is appointed within 6 months of the incapacitated member ceasing to be a Trustee, the Member balance can remain within the SMSF.EPA Download Form
For general information on the rules over SMSF’s please visit the ATO guidance page.