SMSF Planning

The case of Ioppolo v Conti [2015] WASCA 45 addressed a number of issues that need to be taken into consideration when devising a succession plan for your SMSF.

The facts of the case are as follows:

  1. Mr and Mrs Conti were the individual trustees and members of their SMSF.
  2. Mr and Mrs Conti separated. Mrs Conti had several children from a previous relationship and her Will stated that her superannuation entitlements were to be paid to her children.
  3. Mrs Conti did not have a binding death benefit nomination (BDBN).
  4. Upon the death of Mrs Conti, Mr Conti appointed a company named Augusto Investments Pty Ltd to act as trustee of the SMSF.
  5. Mr Conti (as sole director and shareholder of Augusto Investments Pty Ltd) then paid all of Mrs Conti’s superannuation death benefits to himself.

The case raised the following issues:

  1. Was the SMSF in breach of Superannuation Industry (Supervision) Act 1993 (Cth) (‘SIS Act’) because upon the death of Mrs Conti, the SMSF only had one trustee?
  2. Do the Executors of an estate automatically take the place of a trustee of an SMSF who has deceased?
  3. Was the trustee of the SMSF obliged to pay Mrs Conti’s superannuation entitlements to the children of the deceased?

Section 17A of the SIS Act states that a SMSF cannot have less than two individual trustees. However, a SMSF has six (6) months after a failure to meet this requirement before it must cease to be such a fund.

The surviving trustee must act in accordance with the terms of the SMSF deed. There was no obligation under s17A of the SIS Act or the SMSF deed requiring Mr Conti to appoint the legal representative of Mrs Conti’s estate trustee/s of the SMSF.

The SIS Act outlines a strict regime for BDBNs, however, with no BDBN, the decision of who the superannuation entitlements would be paid to was a decision for the trustee of the SMSF. As trustee of the SMSF, Augusto Investments Pty Ltd decided to pay Mr Conti all of Mrs Conti’s superannuation entitlements, and none to her children. The court held the SMSF trustee was entitled to do so.

When dealing with your succession plan for your SMSF it is imperative you take proper steps in accordance with the SMSF deed to direct where your death benefits are to be paid. It is not enough to prepare a Will.

Zinta Harris