Case law points to ‘growing importance’ of SMSF document chain

Another thing SMSF Trustees need to be aware of.

   

 

A raft of recent court cases has drawn greater attention to the importance of ensuring each of the documents in an SMSF’s document chain links up correctly, says an industry consultant.

Speaking in a recent webinar, Smarter SMSF chief executive Aaron Dunn said that, each and every year, there is an ever-increasing flow of case law around things such as the payment of death benefits which has highlighted the importance of getting the fund documents together.

While historically the focus has been on whether binding death benefit nomination (BDBN) is valid or invalid, or binding or non-binding, more recent cases studies have started to focus more on the SMSF documents in the chain.

“They’re looking at things like the deed update, the changes to trustees and the pension documents,” Mr Dunn explained.

“The courts are making it very clear that if you don’t have that chain linked and linked correctly, you are going to expose the current set of information as potentially being null and void, and therefore when the court ultimately makes its decision, it may go back to old deeds or whatever that would be referred to as the operative deed.”

Mr Dunn said the courts are not only looking at the update in respect of the trust deed, but may also look at changes that would be made to trustees and therefore who had the right to potentially make those decisions if the appointment of an individual did not occur properly as well.

Last year saw litigation cases such as Cam & Bear Pty Ltd v McGoldrick, said Mr Dunn, which were taken against SMSF professionals in respect of the recovery of losses where the investments went into bankruptcy and liquidation.

This case means that the SMSF sector is becoming more litigious and that there are significant implications for auditors when they review documents for certain investments.

The Re Narumon case was one of the biggest cases about SMSF documents in the past year, and provided a lot of clarity to the sector.

“It provided some really important clarity from the courts in dealing with whether the documents were effective or not and also whether the trust deed updates and variations that were done throughout the period were valid,” he said.

“It also looked at whether the reversionary pension was on foot or not, because we had a set of circumstances whereby John Giles, the trustee, couldn’t find the pension documents, so they were lost, so therefore the question of whether the pension was on foot or not had to be determined by the courts.”

The case also looked at whether the binding death benefit nominations were in essence defective.

“They were only partially defective, but again, for the first time, we needed to know whether the nomination was void in full or whether the part that could not be paid to a non-tax dependent and non-SIS dependent would mean that the whole BDBN was void or not,” Mr Dunn explained.

 

Miranda Brownlee
30 January 2019
smsfadviser.com

 

 

Any advice contained in this website is of a general nature only and does not take into account your circumstances or needs. You must decide if this information is suitable to your personal situation or seek advice.

Rolanda has been my financial adviser for 20 years. I have always found her to be highly intelligent, knowledgeable and professional in her career. Rolanda is accessible at all times and patiently explains terms that I do not fully understand. I can highly recommend Rolanda and it is a pleasure to do so. I do this with the utmost confidence. Marcia Montgomery (Retiree – home duties and ex-clerk with Water Board)
I retired Oct 2012, and seeking Financial Advice for my retirement funds, I decided to have Rolanda look after my financial affairs, and so happy I did. Since my retirement I am extremely comfortable with Rolanda’s advice, experience and strategies and the returns on my investments. Rolanda is my "Breath of Fresh Air" at this stage of my life and she makes herself available 24/7 should you need to talk with her. Steve Hoad (Ground Engineer, Qantas)
In 1997 I left Energy Australia and decided to join Rolanda Adams Financial Services for the financial support and advice that I would need into the future. That decision has proved a very good one and I am still with Rolanda who has given me advice and friendship over those many years. The advice given has ensured that my investments have been protected and the major losses, of some, during the GFC was not felt by me unduly. Rolanda and her team are very easy to contact at any time and one is always received in a most professional manner. I would be most happy to recommend Rolanda Adams Financial Services to all who need financial services. Graham Fleeton (Manager, Property Insurance Group Energy Australia (Ausgrid))
Rolanda has been my Adviser for the past 18 years. Through her wide industry experience and professional expertise she has ensured the sound development and ongoing management of my investments. Her advice has invariably been sound, timely and entirely tuned to meet my personal needs in retirement. She has a friendly, engaging manner and is always readily available to address any of my concerns. I have no hesitation in recommending her. Neil O'Keeffe (Chief Inspector (retired), Australian Customs Service)

© 2021 Rolanda Adams Financial Services Pty Ltd. All rights reserved. Site by PlannerWeb.