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Catherine Price
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Death and your self-managed super fund

As the saying goes, there are two certainties in life: death and taxes. And when it comes to keeping your self-managed super fund compliant, the death of a member can have significant implications for your funds tax liabilities and concessions.
When a loved one dies, probably one of the furthest thoughts from your mind is what that means for your self-managed super fund. There’s so many things to sort out that often the ramifications for a SMSF just aren’t considered.
But it’s really important to be aware that if a super fund no longer meets the definition of a SMSF under Section 17A of the Superannuation Industry (Supervision) Act 1993 (SISA), then the fund is no longer eligible for tax concessions.
A typical scenario that we see is a husband and wife SMSF, with both parties as individual trustees. The couple have not appointed a legal personal representative (LPR) – who would be able to stand in place of the deceased trustee until death benefit commences to be payable. (It is also worth noting that a LPR can decline the appointment to a trustee of a SMSF, and this is a common occurrence when an estate has appointed a professional trustee company or the Public Trustee.) What this means is that if one of the couple dies, the fund then becomes a single member fund with a single individual trustee and so would no longer meet the definition of a SMSF. In this scenario, the surviving partner either has to appoint another individual trustee or change to a sole director corporate trustee.
Fortunately, there is a six month grace period to restructure a fund to comply with the definition of a SMSF after the death of a fund member. But what if six months has lapsed and you’ve not restructured your fund appropriately after the death of a member? Understandably, restructuring your super fund and the consequences of failing to meet the requirements of super fund law are not often top of mind for grieving family members. The best advice is to be honest and upfront with the Australian Tax Office. You can apply for special consideration so that your fund does not lose its tax concessions whilst you arrange for your SMSF to be restructured to become compliant again as a priority. Then communicate the situation with your self-managed super fund auditor as soon as possible.

How to minimise the risk of non-compliance

The risk of having your fund become non-compliant following the death of a member can be avoided by structuring your SMSF with a corporate trustee. This can save time, money and heartache. A corporate trustee will continue indefinitely and the surviving fund member can continue as a sole director. The only requirement is that the Australian Securities and Investments Commission (ASIC) be notified of the change in director, and if necessary for a surviving member to be appointed as secretary of the company.
For many fund owners, the idea of having a corporate trustee can feel like overkill, but the cost of appointing another individual trustee and changing ownership details once will generally exceed the cost of establishing a corporate trustee.

If you’d like to talk about making sure your SMSF stays compliant and continues to meet the definition of a SMSF, please call Catherine on 02 9522 0981 or email audit@tabs.net.au. We’re always happy to talk through your options and help you to manage your super better.
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Dean Crabb has a phenomenal understanding of business processes and systems and offers an incredible service that looks beyond just IT implementation. Dean takes the time to map out current business operations and can recommend simple, cost effective methods to improve automation and systemisation. Dean has an incredible knowledge of current business apps and approaches each job with a caring, thoughtful attitude. Dean's after-sales customer service is second to none. Dean has saved me from numerous hours of scouring through random apps and software trials and propelled my business forward, rather than trudging through costly experiments.
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Dean Crabb has a phenomenal understanding of business processes and systems and offers an incredible service that looks beyond just IT implementation. Dean takes the time to map out current business operations and can recommend simple, cost effective methods to improve automation and systemisation. Dean has an incredible knowledge of current business apps and approaches each job with a caring, thoughtful attitude. Dean's after-sales customer service is second to none. Dean has saved me from numerous hours of scouring through random apps and software trials and propelled my business forward, rather than trudging through costly experiments.
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