An Enduring Power of Attorney is an important legal document that ensures if you lose your mental capacity through injury or the onset of a medical condition (e.g. Alzheimer’s or dementia) then you have someone in a position of trust to protect your assets and to take care of your affairs.
An Enduring Power of Attorney is especially important if you are a member of a self-managed superannuation fund (SMSF).
Generally, if you are a member of a SMSF you must also be a Trustee or a Director of the Trustee company. Where a Trustee/Director loses mental capacity, then the position of the Trustee/Director may become vacant. As a result, the SMSF may risk becoming non-compliant by the ATO unless the Trustee either rolls over the incapacitated member/ Trustee/Director’s benefit to a retail fund or arranges for a replacement APRA approved Trustee. Rolling over the member’s balance into a retail superfund can cause significant tax consequences (such as CGT and Stamp Duty) and can also lead to practical difficulties – for instance, the assets held within the SMSF may need to be sold and liquified in order to transfer the benefits to a retail fund.
However, if the member has appointed an Enduring Power of Attorney, under section 17A(3)(b)(ii) of the Superannuation Industry (Supervision) Act 1993 (the SIS Act) a person holding an Enduring Power of Attorney is authorised to act in the member’s place as a Trustee/Director. As long as the replacement Trustee/Director is appointed within 6 months of the incapacitated member ceasing to be a Trustee/Director, the member balance can remain within the SMSF.
Rather than running the risk of a non-complying fund, or having to go through the arduous process of transferring the SMSF assets to a retail fund, it is much simpler to have an Enduring Power of Attorney in place.
How can we help?
Please contact our office should you need further explanation in relation to the topics listed above or should you have any other queries regarding responsibilities or obligations of either the Â Body Corporate or an Owner on 1800 621 071 or contact us using our online enquiry form.