Changes to definition of a SMSF
It is regularly acknowledged that a Corporate Trustee is a far superior trustee structure rather than individual trustees. There has however been an anomaly with the definition of a SMSF within section 17A of the SIS Act that ultimately required a SMSF with members under 18 (i.e. child) to have individual trustees.
Section 17A(3)(c) states that certain other persons may be trustees:
(3) A superannuation fund does not fail to satisfy the conditions specified in subsection (1) or (2) by reason only that:
…
(c) if a member of the fund is under a legal disability because of age and does not have a legal personal representative–the parent or guardian of the member is a trustee of the fund in place of the member;
The oversight in the law that exists with this paragraph is that a parent or guardian of a member can act as a trustee of the fund – it does not extend to directorship of a corporate trustee. The ultimately means that any SMSF with child members where a corporate trustee exists does not meet the definition of a SMSF.
As a result of this issue, the ATO through TIES (Tax Issues Entry System) has escalated this issue with Treasury to amend the law. Prior to Christmas, we have seen Tax Laws Amendment (2011 Measures No. 9) Bill 2011 introduced to amend the definition of a SMSF.
This bill amends paragraph 17A(3)(c) so that if the trustee of the SMSF is a body corporate, a parent or guardian can be director of the corporate trustee in place of a member who is a minor and does not have a legal personal representative.
This amendment will apply from 8 October 1999, as this was when paragraph 17A(3)(c) was inserted.
