Admin, BDBN errors flagged for SMSFs this year

SMSF practitioners and their clients have been cautioned on some of the ongoing mistakes that continue to be made with documentation and some of the newer traps that have cropped up with the changes to superannuation.

 

 

Speaking to SMSF Adviser, SuperConcepts executive manager of SMSF technical and private wealth Graeme Colley said there continues to be a number of administration problems that catch out SMSF trustees.

One of these is property being settled in the wrong name which will often attract the attention of auditors, said Mr Colley.

“Limited recourse borrowing arrangements can sometimes be settled the name of the superannuation fund, rather than the underlying holding trust,” said Mr Colley.

Binding death benefit nominations are another key problem area, he warned.

“Binding death benefit nominations may not have been correctly executed because the witnesses will be parties to the binding death benefit nominations itself, sometimes it won't be dated, other times, a bit like the Narumon case, parties that were not a dependant were mentioned as recipient of that binding death nomination,” Mr Colley explained.

“We've spoken to our clients to try and get them to understand that if they get it wrong, then the money may go to someone else rather than who they think it will go to if they happen to die.”

SMSF professionals with high-net-wealth clients also need to be sure that the client has considered both the accumulation and pension components of their SMSF in their estate planning.

“They've got a pension in the fund but they've now also got an accumulation account which some of them may not have had for up to 10 years when the 2007 changes came in,” said Mr Colley.

“So, they may have covered the allocation of the pension, the death benefit pension, but they may not have covered the amount that's now being transferred over to accumulation phase.”

Advisers should encourage clients to review their binding death benefit nominations, he said, to make sure the member’s total benefit is covered not just the amount that's in pension phase.

There can also be issues with powers of attorney, he said, as clients believe that because they’ve got an enduring power of attorney, that it allows them to be trustee or the fund.

“Sometimes paperwork needs to be done, merely because they're an enduring power of attorney doesn't mean that they'll be a trustee of the fund. Other members or other trustees may need to appoint a new trustee so the trust deed itself is important in terms of working out how that person holding an enduring power of attorney will be appointed as trustee or director of the trustee company,” he said.

“From an administration point of view, you will need to notify ASIC if it’s a company and also the ATO about the change of trustee or director of the trustee company.”

 

Miranda Brownlee
04 January 2019
smsfadviser.com

  • When super isn't compulsory

    As Australia’s $2.8-trillion super system attracts even more headlines than usual, more people may mistakenly assume that almost everyone in the workforce is covered by at least compulsory contributions.

  • Investors brace for Brexit - deal or no deal

    When people in the UK woke up on 24 June 2016 to the news that the country had voted to leave the EU (or "Brexit" as it is now commonly known), little did they know that 2.5 years later, the future of the UK's relationship with Europe would still be unclear. As debate and negotiation continue, what should investors do?

  • ATO identifies SMSF contravention red flags

    The ATO has identified certain red flags and problem areas with SMSFs that will attract its attention, ahead of tax time 2019.

  • Extra website resources and tools is one way we offer you and your family more.

    The following are available via our website and are not often available in the one place. All can save you time and effort. *

Read more latest Financial Planning news articles

General Advice Warning

The information provided on this website has been provided as general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of your adviser before you make any decision regarding any products mentioned in this communication. Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither Retirewell Financial Planning nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information.