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I am currently auditing a two member fund with a corportate trustee, one of the members passed away last January and we have been advised that the other member has an incapacity so is unable to act as trustee. An ASIC search has revealed that the member who died was the only director, the other member was removed as a director due to incapacity. At this stage an LPR has not been appointed in place of either member. It is now more than 6 months since the death but wouldn't have been at 30/6/23.
I have queried the accountant regarding the situation who has advised that the paperwork is in progress to appoint the new director but they had to wait on the death certificate. The LPR is the same person for both parties
My query is, firstly shouldn't the LPR have been appointed when the director was removed due to incapacity, and secondly shouldn't the LPR for the deceased have been appointed within 28 days - why did they have to wait for the death certificate? Finally, how is it possible for this to meet the definition of a SMSF, given that according to ASIC there have technically been no directors since the only one died in January?
Thanks Tanya
Your question is focusing on the requirements of section 17A of the SIS Act for a fund to be a "self-managed superannuation fund".
Broadly speaking, where there is a corporate trustee there is an expectation that each fund member is a director of the corporate trustee. Where a fund member is suffering from an incapacity there is an expectation the legal personal representative of the incapacitated fund member becomes a director. Likewise, where a fund member dies their legal personal representative is able to become a director of the corporate trustee. This too should have occurred within 6 months of the fund member's death.
Where the LPRs have not been appointed as directors of the corporate trustee within the six month timeframe, this may mean that the reporting criteria in relation Test 1: Fund Definition Test of the Auditor Contravention Report have been satisfied.
Ideally, the LPRs of the deceased fund member and the incapacitated fund member should be appointed as directors of the corporate trustee as soon as possible, so at least efforts to rectify this matter can be put in place by the time any ACR is lodged.