Eligibility of Trustees

Anyone who is over 18 years old can be a trustee provided they are not under a legal disability or are a disqualified person.

Disqualified persons

An individual is a disqualified person if any of the following conditions apply – they:

• have been convicted of an offence involving dishonesty
• have been subject to a civil penalty order under the super laws
• are insolvent under administration, including being an undischarged bankrupt or have executed a personal insolvency agreement under Part X of the Bankruptcy Act 1966
• have been disqualified by a court or regulator (See below for further detail on disqualification by a regulator)

A company is a disqualified person if any of the following conditions apply:

• a responsible officer of the company (such as a director, secretary or executive officer) is a disqualified person
• a receiver, official manager or provisional liquidator has been appointed to the company
• action has commenced to wind up the company.

 

Disqualification by a regulator

A regulator may disqualify any trustee it considers to not be a ‘fit and proper’ person.

In making this determination, the regulator will take into account the nature or seriousness or number of contraventions of superannuation of laws. This also involves consideration of the trustee’s honesty, knowledge and ability.

 

Registering the SMSF

When a trustee registers a fund with the ATO, it must declare that the trustee and other trustees or directors of the corporate trustee are not disqualified persons.

If a trustee is a disqualified person, the ATO will continue to process the registration application and any registrations for which the fund has applied, however the ATO will not be able to register the fund as a regulated SMSF. The result of this is that the fund will not be eligible for tax concessions.

 

Removing a trustee

Under the superannuation laws, if a trustee becomes a disqualified person, it must immediately:

• notify the ATO of its disqualification (unless the trustee has been disqualified by the ATO); and,
• cease being, or acting as, a trustee

A change of details for superannuation entities (NAT 3036) form must be completed and sent to the ATO within 28 days of resignation of a trustee.

If a person is a director of a corporate trustee, they may also have obligations to inform ASIC.

 

Cannot act as a trustee while disqualified

If a person knows that they are a disqualified person, and they are or act as, a trustee, they are committing an offence which can lead to prosecution and imprisonment, or significant fines. Furthermore, it their fund can be made non-complying.

Other trustees need to ensure that a disqualified person is not and does not act as, a trustee.

 

Restructuring the SMSF after trustee is disqualified

The SMSF has six months after the resignation of a trustee to restructure itself such that it continues to meet the definition of an SMSF. This will generally mean rolling out the disqualified trustee’s superannuation interest from the fund.

Other trustee and directors can:

• roll over the trustee’s benefits to another complying super fund
• appoint an approved trustee who has a licence from APRA (i.e. become a small APRA fund)
• wind up the fund by rolling all members’ benefits out of the fund.

If a trustee is the only member of the fund and the sole director of the fund’s corporate trustee, they should contact the ATO for  further guidance.

 

Becoming a trustee of an SMSF again

Convicted of an offence involving dishonesty

An individual who is disqualified due to being convicted of an offence in relation to dishonest conduct may apply for a declaration waiving their disqualified status. They must do so within 14 days after the date of their conviction, and only if the penalty or prison term is less than that stated in the legislation.

Insolvent under administration

A person who is disqualified due to being insolvent under administration cannot have their disqualification status waived. However, once they are no longer insolvent under administration, they will no longer be a disqualified person and they can become a trustee of an SMSF again.

Disqualified by a court or regulator

If the court or regulator agrees to revoke a person’s disqualification, as per the circumstances set out in the legislation, they will not be a disqualified person from the day of revocation of the disqualification.

There are no other circumstances in which a trustee’s disqualified status can be changed.