Every person should consider an enduring power of attorney. As
well as the 'usual' risks of who looks after your affairs,
members of SMSFs also risk compliance issues for their fund if they
do not have a valid enduring power of attorney in place.
If a member becomes incapacitated, then, practically, they can
no longer be a trustee or director of a trustee company. This means
that the fund can no longer satisfy the member and trustee rules
found in section 17A of the Superannuation Industry
(Supervision) Act 1993 (SISA). The practical
effect of this is the member must leave the fund and must take
their benefit as a lump sum, appoint an approved trustee or roll to
a retail fund.
If a member has appointed an attorney under an enduring power of
attorney, then the attorney can become the trustee or director of
the trustee company in the place of the member. This allows the
trusteeship to be restructured with the attorney replacing the
member and the member to remain in the fund.
It is important to seek advice to make sure the trustee change
complies with the provisions of the trust deed or the constitution
of the trustee company, and that the trust deed for the fund allows
attorneys to be trustees or directors of a corporate trustee. There
are many trust deeds that do not provide adequately for this
situation, which can have unpleasant consequences.
Acting as a trustee under the EPOA
Once appointed, the attorney performs their duties as trustee
(or director of the trustee) as a trustee or a director
rather than as attorney or agent for the member. The attorney will
be subject to the obligations of a trustee and must sign the
trustee declaration stating that they understand their duties as a
trustee. The attorney cannot be a disqualified person and must be
eligible to be appointed as trustee.
Form of the enduring power of attorney
The form of the power of attorney is also very important. A
power of attorney that is not an 'enduring power of
attorney' will not be sufficient. Each state and territory in
Australia has a prescribed form that must be used for an enduring
power of attorney to be effective. If the enduring power of
attorney appoints multiple attorneys, then any attorney validly
appointed can act as trustee or director of the trustee in the
An enduring power of attorney can also assist with satisfying
residency issues for SMSFs. For example, if a husband and wife
(trustees of their SMSF) were transferred overseas for an
indefinite period of time, they could continue to satisfy the
definition of a SMSF if they have a valid enduring power of
attorney in favour of another person, they both resign as trustees
and they appoint that person as a trustee in their place.
More information and application forms
An enduring power of attorney is a vital document for all SMSF
members, is very simple to organise and should be mandatory if the
members wish to avoid any compliance issues on their
In the years following the global financial crisis of 2008 many Australian investors lost their life savings as financial products failed and the Australian Stock Exchange shed over 3,000 points.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).