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I have a fund to audit. As per the deed dated in 2015, ' Principle employer' is listed with in the schedule.
This is a single member fund.
The trustee is the same company as the principle employer.
The trustee company has two directors.( the member and another individual)
May I know the situation to list ' principle employer'?
As an auditor, do we have to take any additional check?
Hi There are a couple of other practical things to look out for;
1. if the SMSF trustee is also a trading company, separation of assets could be difficult unless all SF assets clearly show the company ATF the SMSF in the title
2. the dual purpose company cannot be a special purpose trustee company so it is not eligible for reduced ASIC fee
3. Often a company may be trustee for a family trust as well as an SMSF so the same issues as above apply - this often occurs when trustees don’t want the expense of a separate company
Separation of assets is important in the event of the company being sued in relation to a non-SMSF matter - it could put SMSF assets and therefore members funds at risk
If I do see it in a deed, I always make a management letter comment regarding the risk, but the accountants tell me it almost always falls on deaf ears
Regards
Julie
Hi Noble
It is rare that any recent SMSF's are established with a Principal Employer (or Employer Sponsor) as part of the deed.
A Principal Employer is often seen in older deeds & the auditor needs to check the Fund's Trust Deed to see if any action is required by the Trustees as a result of the Fund being set up this way.
A Principal Employer relates back to old legislation when an employer and the trustee of the SMSF had an agreement in relation to the making of contributions.
Often the biggest issue is the deed may say that the Principal Employer has to approve a deed of variation if one is done. This may become a problem if this company has since been sold by the members or deregistered.
The trustees should get a lawyer to review the current deed in your example and it may be appropriate to do a deed of variation where the Principal Employer is removed from the Fund's latest trust deed.
An article from 2018 that addresses this issue can be found at:
Thanks
SMSF AAA