Category Archives: Superannuation

Changing A SMSF Trustee to a Corporate Trustee

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SMSF


Benefits of a Corporate Trustee

1. Changing Members


If an SMSF is set up with a corporate trustee structure you can add a member (e.g. a spouse or child) or remove a member (e.g. if a member dies or can no longer act as trustee) with much less hassle than an individual trustee structure. If there is a change of fund members, it’s not necessary to change the name on the ownership documents for each fund asset as the trustee of the fund remains the same.

On the other hand, a fund with an individual trustee structure will be required to re-register all assets held in the SMSF (with relevant authorities and registries) each time a member is added or removed. If you have a number of different investments in your fund, this can result in a lot of administration, paperwork, time, and potentially cost, to manage this change. For corporate trustees, the only change is notification to both ASIC and the ATO of the change of directors and members as the name on the assets will be the name of the corporate trustee.

2. Estate planning


An SMSF set up with a corporate trustee can have a single member and director. So, if one member of a two member fund leaves (for example, where either a husband or wife member passes away) and a corporate trustee structure is in place, the fund will continue to satisfy the trustee structure rules. In the case of a two member SMSF with an individual trustee structure, if one member dies, another individual will need to be appointed as a trustee of the fund.

3. Borrowing to purchase property


If you are looking to borrow to purchase property in your SMSF most banks require a corporate trustee arrangement. Banks generally prefer that a separately recognised legal entity is identified as trustee of the fund.

4. Reduced liability


A corporate trustee structure can also provide greater peace of mind around liability. Your personal liability, as a director of a corporate trustee, is generally limited to the assets held within the SMSF. An individual trustee arrangement does not provide this security and members’ personal assets may be subject to liability claims. This could be particularly important for you if you are considering holding property in your SMSF as public liability claims can be substantial.

5. Clarity


Having a corporate trustee makes the separation of assets and income for individuals clearer. This makes it easier to satisfy the regulator that superannuation assets are being separately maintained from the member’s personal assets.

When changing to a corporate trustee, the provisions of the Superannuation Industry (Supervision) Act 1993 (Cth) (‘SISA’), which impose an additional regulatory framework in relation to corporate trustees of SMSF’S, must be considered. Relevant provisions are:

  • Under as 17A(1) SISA, all members of an SMSF with a corporate trustee must be directors of the corporate trustee of the fund, and vice versa, each director of a corporate trustee must be a member of the SMSF;
  • Under s188 SISA, an individual is not eligible for appointment as a director of a corporate trustee unless they have consented to the appointment in writing; and
  • Under s104A SISA, all individuals becoming directors of a corporate trustee of an SMSF must sign a declaration in the approved form confirming that they understand their duties as directors of thee corporate trustee within 21 days after their appointment. The approved form is the ATO ‘Trustee Declaration’ (NAT 71089). This declaration must be retained by the corporate trustee for as long as it is relevant, and in any case for at least 10 years.

Some other relevant considerations that should be borne in mind include:

  • A corporate trustee must not be paid for their services as trustee, and no director of the corporate trustee can be paid for their duties or services as a director of the trustee;
  • The assets of the fund need to be registered in the name of the company that has been set up to act as corporate trustee; and
  • A company established as the corporate trustee will require a company constitution and certificate of registration.


What is required when transferring from a individual trustee to a corporate trustee?


The following steps will have to be taken if you choose to switch to a corporate trustee:

  • A company must be established to act as corporate trustee;
  • A constitution must be drafted for this company;
  • The current trustees must provide the incoming corporate trustee an instrument in writing stating they will be retiring as trustees and the corporate trustee will be assuming duties as trustee at a given date and this instrument being signed by all relevant parties;
  • The company must provide a signed consent stating it consents to acting as corporate trustee;
  • The directors of the corporate trustee must provide a signed consent stating they consent to being appointed as directors of the corporate trustee;
  • The directors must provide the corporate trustee with a signed ‘Trustee Declaration’;
  • All assets of the fund must be transferred to the name of the corporate trustee.


Contact us for a Free Consultation


If you have any questions regarding your SMSF, call the experienced lawyers at GMH Legal for a FREE consultation:

Tel: (02) 9587 0458
Email: solicitors@gmhlegal.com

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Post by GMH LEGAL – Solicitors & Barristers.

Our Legal Fees & Services

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Family Law, Criminal Law, Immigration, Traffic Law

At GMH Legal we believe that client relationships matter more than time sheets which is why we offer a range of alternative fee arrangements to best suit your needs.

Our focus is on client service and establishing mutually rewarding relationships with our clients. We think that billing by the hour does not encourage the most efficient and effective delivery of legal services.

We strive to be innovative and eliminating the inherent inefficiencies of the billable hour means that we can focus on achieving the best possible result for our clients.

However, we do recognise that not all matters lend themselves to an alternative fee arrangement. That is why we offer a range of alternative fee arrangements, including straight time based billing if that is what works best for you.

We will work in collaboration with you to determine your specific legal requirements and then develop the most effective strategy and fee arrangement for your needs.

What we offer

GMH Legal can offer you the following fee arrangements, or a combination of these, as an alternative to time based billing. These options can be customised to suit your needs. No matter what fee arrangement you prefer, providing you with certainty by scoping and pricing our work upfront is our priority.

Fixed and value pricing

GMH Legal can charge you a fixed price for any matter. We will quote you a price and stick to it. If there is a change in the agreed scope of work, we will send you a variation detailing the new scope and the price for that change.

Value pricing is a fixed price that we agree up front with you that reflects your legal requirements and the service we provide. With value pricing you don’t pay for our time – you pay for the work we do and the value you receive.

This ensures you receive more value for your legal spend. Value pricing can also include fee incentives to achieve your goals and for results that exceed expectations. These incentives align our interests with yours, making your success our success.

Flexible retainers

With a retainer agreement, GMH Legal will charge you a fixed periodic fee for the provision of legal services. A retainer provides the budgetary control and certainty that hourly billing can’t.

We determine the periodic fee by calculating the average value of our services over the time taken to conduct the matter. A retainer means you know exactly what you will pay for the result you desire.

We will regularly review the terms of the retainer with you to ensure it remains fair to both parties.

Event-based pricing

GMH Legal can charge you a fixed price for each stage of a matter. We work with you to properly scope the matter, determine the stages involved and then agree a fixed fee with you for each stage.

Want to know more? Contact us to discuss how we can tailor a fee arrangement to best suit your needs.

George Hanna
Director Solicitor

Tel: (02) 9587 0458
Email: solicitors@gmhlegal.com

Homebuyer’s Guide to Conveyancing

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Buying your first home can be a confusing process, particularly when it comes to conveyancing.

Taking your first step on to the property ladder can be an exciting time.

But for those who have never been involved in a property purchase, the conveyancing process can often seem hard to understand.

Conveyancing - buying / selling property

What is conveyancing?

Conveyancing is the word used to describe the legal steps involved in buying or selling a property and is carried out by a legal professional or solicitor known as a conveyancer.

It includes checking the legal title to a property – that is, whether the house or flat is actually the vendor’s to sell.

It also includes arranging searches to highlight any potential issues that may affect your decision to buy it.

For example, a water and drainage search confirms whether the property is connected to the public sewers and mains water.

And an environmental search will highlight any contamination or flooding issues in the vicinity.

A conveyancer will also deal with payment between parties when the transaction completes.

Is it the same as surveying?

Conveyancing is not the same as surveying.

A survey is concerned with the physical condition of the property and is something that should be carried out by a professional registered with the Royal Institute of Chartered Surveyors.

A surveyor will check physical matters which could affect the value of the property, such as its structural soundness.

If you are getting a mortgage, your lender will usually send its own surveyor to the property to carry out a valuation.

However, this is not the same as a full-blown survey and you should instruct your own surveyor.

Why do you need a conveyancer?

Buying a house is one of the most expensive things you’ll do and the legal process can be very complicated.

As a result, you need someone to give you the right advice and this is what conveyancers are here for.

How much does conveyancing cost?

What you pay your conveyancer varies depending on the value of the property and the circumstances surrounding the transaction.

For example, if the property is a listed building or in a conservation area the legalities involved may be more complicated so the fee may be higher.

Conveyancers tend to offer a fixed fee for their work, but disbursements – the costs which a conveyancer pays on your behalf, such as searches and stamp duty – may fluctuate.

How long does conveyancing take?

If everything goes to plan, on average it takes approximately one to three months from the time you agree to buy or sell the property until you move in.

The biggest hold up is often waiting for confirmation of your mortgage offer.

So buyers would be best advised to get their mortgage arrangements in place from the outset.

How do you choose between companies?

As with any service it is always advisable to shop around for different quotes.

However, conveyancing tends to be competitive, so if you obtain a quote that seems too good to be true it probably is.

Any final advice?

Finally, as well as being an expert in property matters, your conveyancer should be approachable and easy to talk with.

Having direct contact with the person who is dealing with your case is always advisable, to help guide you through the process.

In my experience, the best way to find a good conveyancer is to get recommendations from family and friends who have been through the process. At GMH Legal solicitors, we assist our clients daily in their conveyancing needs, and are ready to assist you when the time is right.

Should you have a conveyancing question, call one of our solicitors on (02) 9587 0458

ATO has SMSF property investors in its sights

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The Australain Taxation Office (ATO) has warned trustees of SMSFs to be cautious when investing in property.


Acting commissioner Bruce Quigley says he is concerned people are using their SMSF to invest in property without fully understanding their obligations under the law – or that some are seeking to take advantage of certain types of arrangements.

Quigley acknowledged that investing in property can be a confusing area for some people.

“We have observed that some arrangements are deliberately entered into to get around the law, which can result in the fund’s trustees being disqualified, facing civil penalties or even facing criminal charges. Those marketing properties to SMSF trustees as part of such arrangements could be referred to ASIC,” he said.

The finer details are important, and trustees must ensure that property is the right investment for their SMSF – and that the arrangement is legal.

“We have also seen instances where holding trusts have not even been established at the time the contracts to acquire are signed. In other instances, the title of the property is held in the individual’s name rather than the trustee of the holding trust. Another common mistake is gearing in a related unit trust, which is not allowed under the law,” said Quigley.

He said some of these arrangements, if structured incorrectly, can’t simply be fixed.

“The only option may be to unwind the arrangement which could involve forced sale of assets at an inconvenient time. This could be very expensive for the fund with potential stamp duty and tax consequences.”

“I urge trustees to get reliable, independent advice when making investment decisions and to obtain advice from us if they are contemplating entering into these sorts of arrangements. The responsibility for ensuring their SMSF complies with the law rests with them.”

Commenting on SMSF borrowing strategies, SMSF Professionals’ Association of Australia (SPAA) technical director Peter Burgess noted that it’s vital for clients to be well educated.

“Used in the right circumstances and structured correctly, there can be considerable benefits associated with these borrowing strategies. But SPAA is concerned that some people are seeing this type of borrowing as a way into a property investment without realising the potential downside,” he said.

SPAA has created a fact sheet, designed to be issued by SMSF practitioners to alert and educate their clients. Highlighted risks include:

  • Only assets that the SMSF trustee is not otherwise prohibited from acquiring can be bought under a limited recourse borrowing arrangement. Although there are exceptions, this generally means that assets a trustee or a related party own cannot be bought under this arrangement.
  • Assets acquired under this arrangement cannot generally be replaced with a different asset. In practice, this means alterations to a property cannot be made if it fundamentally changes the character of the asset.
  • There may be additional costs associated with acquiring an asset under this arrangement.
  • Loan repayments are deducted from a fund, meaning it must always have sufficient liquidity to meet repayments.
  • The ATO has become aware that certain limited recourse borrowing arrangements have not been structured correctly. In these cases it’s not simply a matter of restructuring the arrangement. Rather, it has to be unwound, often at a substantial loss.

Here at GMH Legal, our expertise in the superannuation sector allows us to ensure that you are getting the best possible advice personalised for your circumstances.

Should you have a SMSF query, please contact our Principal Solicitor, Mr George Hanna on 02 9587 0458 for a free consultation.

The “standard” trust deed

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We’ve heard this so many times. You ask the question to a trustee or even an accountant or adviser – “what trust deed are you using?”

And the answer is “oh, you know, just a standard SMSF trust deed”.

Standard…… is there any such thing ?

What’s the big deal?

The big deal is that your trust deed is effectively the document that contains the governing rules of your fund. If your trust deed prevents you from doing a particular strategy or prevents you from investing in an asset you would like, then you can’t do it (unless you upgrade your deed), regardless of the fact that you may be able to do it under the SIS laws. Further to this, on the death of a member the trust deed will often direct what needs to happen and what options are available to the trustee. Again, this may be different (or restrictive) compared to what the law allows.

Examples of differences

Here’s just a couple of items that highlight the differences in trust deeds:

  • Member voting: in the event of a disagreement within the fund around a particular action, how are votes counted when it comes to making a decision? Some deeds may say its one vote per trustee/director, while others may say a vote is based on the member balances (so that the members with the highest member balance controls the most votes). Which would you prefer?
  • Binding death benefit nominations: there is an ATO Determination (SMSFD2008/3) that in a nutshell means SMSF trustees can implement non-lapsing binding death benefit nominations. In other words, they are not subject to lapsing after 3 years. However, many trust deeds will state that a BDBN can be created, however that it will lapse after 3 years. This is a classic case of a deed saying something prescriptive about what used to be interpreted as the law but is now not really required. Further to this, some deeds refer to a death benefit agreement or SMSF Will, which becomes part of the deed itself and are different beasts again.

The objective of this article is not to go into trust deeds in detail, but you now get the point. The above examples are just the start.

The bottom line:

The bottom line is that there is absolutely no such thing as a “standard” SMSF trust deed. This myth is busted.

However, the next question that then arises is – “how do I know if the deed I’ve got is right for me?”.

If we are being realistic here, trust deeds are rarely read or understood by regular trustees, and as such they will rely on the advice of an adviser or accountant (so the adviser/accountant needs to really understand the differences with trust deeds). We’ll endeavour to follow up in the future with a more comprehensive article on what the modern trust deed should be catering for.

Here at GMH Legal, our expertise in the superannuation sector allows us to ensure that you are getting the best possible advice personalised for your financial and personal circumstances.

Should you have a SMSF query, please contact our Principal Solicitor, Mr George Hanna on 02 9587 0458 for a free consultation.

Increase in SMSF levy

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The Government have announced an increase in the SMSF levy from $191 to $259 per annum from 2013-14 onwards. They say that this due to the fact that the current levy is not fully covering the costs of regulating the sector.

While they were at it, they also announced that the collection of the SMSF levy will change, in that it will be paid in the relevant financial year, rather than the following financial year. This brings consistency with how APRA regulated funds pay the Superannuation Supervisory Levy in the same financial year.

The change in the SMSF levy collection timing will be phased in over the two years 2013‑14 and 2014-15 to give SMSFs time to adjust.

Should you require any assistance in an SMSF matter, please contact the Principal Solicitor for GMH Legal, Mr George Hanna on 02 9587 0458.

SUPERANNUATION – Compliance and Regulatory Issues

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GMH Legal can help you navigate through the complex compliance and regulatory principles of superannuation. Recent changes in the regulation of superannuation across Australia means that you might be affected.

Whether you are an owner of a business or interested in forming your own Self Managed Super Fund, GMH legal can provide tailored solutions to achieve your personal and financial goals.

Trust deed interpretation, reviews and amendments

A superannuation trust deed is a legal document which outlines the rules and procedures for the running of a superannuation fund and more specifically, what the trustee can and cannot do.

The interpretation of such trust deeds can often be a complex exercise especially if you are not equipped with the relevant legal tools and resources. At GMH legal, our experts can help you with all your trust deed needs ranging from compliance and administration to the amendment of the trust deed.

Trustee duties

Self Managed Super Funds impose stringent rules on trustees to properly manage and meet the appropriate legal and tax obligations owing to them. Penalties for mismanaging or breaching these compliance regulations can be high and therefore obtaining accurate and up-to-date legal advice relating to your Self Managed fund is crucial.

There are several governing rules which apply to trustees managing their own super funds and derive from:

+ The clauses set out in the super fund Trust deed;
+ The provisions of the Superannuation Industry (Supervision) Act 1993;
+ Rules imposed by tax legislation and trust law.

Our team at GMH legal is committed to providing you with professional advice to ensure that your super fund is properly managed and maintained.

Successor fund and other transfers

If you are thinking of setting up a Self Managed Super Fund or transferring your existing Super to other institution, GMH Legal can ensure that your rights are preserved and all the fine print is explained.

Under Superannuation laws, transferring your Super from one fund to another is possible if:
+ The Trustees of the Super funds agree as to rights under the new fund; and
+ The Trustees act in the best interests of members.

GMH Legal can provide professional advice to ensure that the transfer is completed hassle free and in your best interests.

Fund establishments, restructures, mergers, rationalisations and closures

At GMH Legal, we understand the intricacies of Super funds and have the experience to help:
+ Create your Self Managed Super fund;
+ Restructure your existing Super fund;
+ Deal with any mergers, rationalisations and closures relating to your fund.

Superannuation issues in acquisitions and disposals

Given that Superannuation laws are continually evolving, new rules and regulations have been put in place governing Superannuation.

As part of the Stronger Super reforms for instance, acquisitions and disposals between Self Managed Super Funds and related parties must be conducted through the market, where one exists. If no market exists, the transaction must be supported by a valuation from an independent valuer.

Here at GMH Legal, our expertise in the superannuation sector allows us to ensure that you are getting the best possible advice personalised for your financial and personal circumstances.