Q: I have a Self-Managed Superannuation Fund in place and the relationship that I have with the other trustee (my ex-wife) has broken down due to our recent separation. I want to purchase some listed shares within the fund, however our deed states all trustees must agree to this. What should I do as my ex-wife is making it difficult to make such decisions? What are my options?
A: The break down in the relationship between trustees can occur in any SMSF which includes business partners, family and friends. In your situation, the complexity involved will depend upon your situation and the current state of the relationship with your ex-wife.
Firstly, you need to consider what options are available to overcome any day-to-day issues that you cannot agree upon, such as the purchase of listed shares within the fund. You should consult your trust deed as it may contain a deadlock provision which allows the member who has the larger member balance to have a casting vote.
Both trustees are responsible for the preparation of the funds financial accounts and both trustees will need to sign these. A fine can be applied by the Australian Tax Office (ATO) should this not occur. The fine is applied to each individual trustee or divided amongst the directors of a corporate trustee. The fine needs to be paid from the trustee’s personal funds, not the SMSF.
You can consider speaking with the Australian Tax Office (ATO) to advise them of the ongoing issues being experienced. This does not resolve any trustee of their role and responsibilities nor does it avoid possible fines or penalties should your basic trustee duties not be performed.
The ATO will appreciate the proactive approach being taken, but they will not get involved in the resolution of trustee disputes and issues. The ATO can only act upon a court order, such as the removal of a member of a fund acting as a trustee, or disqualification of person acting as a director of company (such as corporate trustee company).
You need to consider the ongoing compliance of the fund to the superannuation rules and regulations. If a fund does not comply with superannuation law during a dispute, administrative penalties can apply or it is possible in the case of serious contraventions that the ATO can deem the fund non-compliant – which is more than a slap on the wrist as this will remove the SMSF concessional tax treatment and tax the fund at the highest marginal tax rate, 49%. This means nearly half of the funds value disappears.
To remove a director from a company, you need to obtain his/her consent unless the company constitution allows for this to occur without it. Most company constitutions do not contain these clauses, and this means you need to seek legal advice.
Given you are going through a property settlement and the SMSF will be a key part of it. It is important to seek legal advice from a family law specialist who has extensive knowledge and experience in SMSF’s.
So what is next?
Seek legal advice. The legal expert can assist you initially with a mediation session between the trustees, and this might resolve some of the issues at hand.
All parties need to ensure the ongoing compliance of the fund as your SMSF will be a part of your upcoming property settlement with your ex-wife, so all parties involved have a vested interest.