Law should be reformed to help protect SMSF members from elder abuse

The Australian Law Reform Commission has made a number of recommendations to improve succession planning in SMSFs, and help protect older members.

The ALRC was asked to consider changes which would help protect against elder abuse, including financially.

The ALRC makes several recommendations in the report Elder Abuse— A National Legal Response around superannuation:

  • a review of the structure and drafting of the death benefit provisions in SIS Act and Regulations, including the witnessing requirements
  • the inclusion of ‘replaceable rules’ in the SIS Act for SMSFs, providing for an enduring attorney to become trustee/director where this was provided for in the “enduring document and notwithstanding the terms of the trust deed and constitution of the corporate trustee or the actions of the other trustees/directors.”
  • amending the operating standards of SMSFs to add a requirement to consider in the investment strategy the suitability of the plan where a trustee/director “becomes ‘under a legal disability’.”
  • amending the SIS Act and ATO Trustee Declaration form so that an individual is required to notify the ATO when they become a trustee of an SMSF due to being an attorney under an enduring document.

The SMSF Association welcomed the report as a “measured approach”, saying the recommendations of the ALRC are “positive steps” towards helping mitigate the risks faced by aging SMSF members.

“In our opinion the ALRC has found the right balance with its suggested reforms between mitigating this emerging risk without placing overly draconian restrictions on how the SMSF sector is regulated,” said SMSF Association CEO John Maroney.

“The investment strategy recommendation will ensure that SMSF trustees and their specialist advisors can give greater thought to planning for loss of capacity and ensuring that the right people are assisting SMSF trustees with their fund as they age,” he said.

“Similarly, we support the ALRC’s call for a review of the laws regarding binding death benefit nominations for superannuation fund members, acknowledging that this is an area of law that is seeing more disputes among a deceased’s beneficiaries and relatives.”

“This report is an important step forward in combating elder abuse and we look forward to working with the Government in implementing the ALRC’s recommendations.”

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