Australian Taxation Office notification

7.149  Since 1 July 2007, s 104A of the SIS Act has required that a person, on becoming a trustee, or director of a company which acts as trustee, of an SMSF sign an ATO approved form—the ATO Trustee Declaration.

7.150  According to the ATO, the purpose of the declaration is primarily educative—reinforcing the roles and responsibilities that are attached to running an SMSF.^[143] The declaration contains information on trustee duties, the sole purpose test, investment restrictions and rules regarding the administration of the SMSF.^[144]

7.151  The declaration must be signed within 21 days of being appointed as a trustee, or as a director of the company acting as trustee. There is no requirement to send the declaration to the ATO. The obligation is simply to retain the declaration for as long as the person is a trustee or director of the company and in any event for at least 10 years.^[145] The ATO may request to see a copy of the declaration at any time. It is an offence not to sign the declaration within the 21 day period, to fail to provide a signed declaration to the ATO when required, and to fail to retain the signed declaration.^[146]

7.152  Existing trustees/directors also have an obligation to ensure that a new trustee/director signs the ATO Trustee Declaration within the 21 day period. Further, the other trustees/directors must ensure that the signed declaration is retained for the required period and provided to the ATO as and when requested.^[147]

7.153  Currently, there is little additional oversight when an individual becomes a trustee/director of an SMSF pursuant to an enduring power of attorney. SMSFs are subject to less regulation on the principle of individual choice and control. This is attenuated when a person loses capacity and the central feature of SMSFs is broken—that the beneficiary and manager of the funds are the same person. ATO notification would bring to the regulator’s attention SMSFs that may need greater scrutiny and attention.

7.154  The requirement to lodge the form would signal to the new trustee/director the seriousness of the obligations and would highlight the role of the ATO as the regulator of SMSFs. The obligation to lodge the form also ensures the form is read and signed. This cannot be guaranteed with the current arrangement where there is no specific obligation to lodge the form with the ATO.

7.155  Recommendation 7–4 builds on suggestions from both Dixon Advisory and the SMSFA in relation to trustee notifications and annual returns. The SMSFA suggested:

a simple amendment to the SMSF Annual Return that is lodged with the ATO allowing SMSFs to alert the ATO when an EPOA has been used in the administration of the fund. This can be established by a ‘tick box’ and will provide a flag to the ATO of which funds may now be at higher risk for elder abuse.^[148]

7.156  Dixon Advisory highlighted the important educative value of the ATO Trustee Declaration. The ALRC considers that the declaration is the appropriate vehicle for informing the ATO that an enduring attorney has taken over as trustee/director. While the SMSFA’s suggestion of including this information in the annual return has merit, it is less immediate than the ATO Trustee Declaration, which would need to be lodged within 21 days. In addition, the annual return is a broader requirement to lodge the accounts of the fund whereas the ATO Trustee Declaration requires specific focus on the individual responsibilities that apply to trustees/directors.

7.157  The ALRC notes that SMSFs are subject to audit requirements and that these requirements were strengthened in 2013. In this context, it could be argued that, as SMSFs are already subject to regular audits, there may be marginal benefit in making the ATO aware that an individual has been appointed because a member has suffered a legal disability so that they can apply greater scrutiny. Nevertheless, the broader regulatory framework for SMSFs needs to be taken into account. There is less oversight and regulation of SMSFs because those running the funds are the beneficiaries. Where that is not the case, because a member has suffered a legal disability, it is appropriate to provide a legislative basis for the ATO to apply greater scrutiny.