Legislations threatens single trustee regimes
Up to 5000 existing DIY funds may have to change their structure if they continue with a single trustee who is also the fund’s single member.
Recent government draft legislation would abolish excluded superannuation funds with an individual who is both the sole member and trustee.
New funds will have to have either two trustees or appoint a company, with the member as the sole director, as trustee.
The Australian Prudential Regulation Authority (APRA) has been approving this type of fund for four years, says Super Concepts director Chris Wilson, but now the status of existing funds under the single trustee regime is unclear.
In a letter to Melbourne lawyers Madgwicks, APRA says it is waiting for legal advice on the compliance status of these funds under existing legislation. It adds that if this cannot be agreed upon, APRA will ask Treasury to make a legislative solution.
Wilson says APRA and the tax office, which will look after DIY funds after July 1, want to come to a solution.
Madgwicks senior associate Rick Goldberg says the funds in question should look at restructuring to meet the new proposed requirements.
"While APRA might turn a blind eye to these funds, or the new legislation defeated in parliament, I think it is more likely funds will have to restructure," he says.
Wilson warns that restructured funds must ensure their previous stance was legal. Any action that removed their excluded funds status would have tax implications.
"These funds should restructure sooner rather than later as the legislation looks set to be passed," he says.
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