WHY WE RECOMMEND A CORPORATE TRUSTEE FOR A SMSF
A company may cost $598, but then your mental security has got to be worth $598, surely? Consider the following:
- Each time the membership of an SMSF changes, the trustees need to change as well. Changes to fund membership creates additional administrative work that inevitably exceeds the cost of putting a corporate trustee in place from the outset;
- certain property title registrations (such as Landgate in WA) do not recognise trust relationships. So a Declaration of trust needs to be lodged. as a result of the Declaration of Trust the Registrar will then lodge a caveat to rpotect the interests of the members. If the SMSF has individual trustees and a new member joins the fund, a transfer is required from the old trustees to the new trustees. In addition a new Declaration of Trust is required;
there are circumstances where trustees can be personally responsible for their actions and can therefore be sued. Owners of property have a duty of care to all individuals on their premises.
In Giovenco v Dick (2010) NSWDC 4 the court held that the owner of a property was liable (a SMSF) for the death of an electrician who was hired to decommission an old solar hot water system and replace it with a new one. The electrician was electrocuted after coming into contact with an exposed wire from the previously used solar hot water heater.
Ms Giovenco was awarded $350,000 in damages.
The super laws provide people with the ability to bring a claim against the trustees of SMSFs to recover loss and damage, which may include action for negligence. SMSF trustees need to consider any hazards on their business real property. Consider having an insurance policy in the SMSF to cover the business real property and public liability.
Shail Superannuation Fund and Commissioner of Taxation [2011] AATA 940 - husband removed $3,460,000 from the SMSF without wife's consent or knowledge (unauthorised withdrawal no condition of release, subsequently absconded overseas).
The ATO issued a notice of non-compliance, and the remaining Trustee was required to pay $1,583,873.68 in tax and $1,475,322.50 in penalties. As the Fund now lacked assets, and the husband has absconded, the wife became personally liable for the tax and penalties owing.