Following on from changes made to insolvency legislation in early 2021 to allow small businesses to access a simplified liquidation process and debt restructuring strategies, amendments have been made to the SIS Act. A new category of disqualified person has been introduced from 8 December 2021 that could impact SMSF Corporate Trustees. Where a company acts in multiple capacities and one of those is as Trustee of an SMSF, the appointment of a restructuring practitioner will trigger the disqualification of the Corporate Trustee.

What Adviser’s should look out for

For your existing SMSF’s, if a Corporate Trustee of an SMSF has had a restructuring practitioner appointed, it can no longer act as Trustee of the SMSF. The ATO will need to be notified as soon as practicable. The SMSFhas six months from the date that the practitioner is appointed to either:

  • restructure to meet the definition of an SMSF
  • appoint a RSE (registrable superannuation entity) licensee and become a small APRA (Australian Prudential Regulation Authority) fund, or
  • voluntarily wind up your SMSF and roll the benefits into an APRA regulated fund.

When establishing a new fund with an existing corporate trustee, you will need to ensure that the company does not have a restructuring practitioner appointed and can in fact act as trustee of the SMSF.

Tips for Advisers to keep things simple

Whilst this change may only impact a small number of funds, there are a number of things Advisers can do to protect their clients and themselves:

  • Review your fund establishment and takeover processes to ensure that you are asking the right questions about existing trustee companies
  • Work with your clients so they understand these new changes and will be sure to let you know if a restructuring practitioner is appointed
  • Keep things simple. It might make more sense that the Corporate Trustee is a special purpose trustee and provide greater protection

At Keep It Simple Super we work closely with Advisers to ensure that even the slightest risk to their SMSF clients is addressed. Our wholesale service is backed by dynamic processes that are constantly updated so you won’t miss any legislatives change that might impact your clients.