Enduring Powers of Attorney
If you lose capacity, your SMSF does not stop having compliance obligations. Contributions must still be managed, pensions must still be paid, and the fund must still meet its annual lodgement requirements. Without a valid enduring power of attorney in place, the fund may be left without a properly authorised trustee to manage these obligations. We prepare enduring powers of attorney for SMSF trustees that cover both personal and financial decisions, ensuring your fund and your affairs can continue to be managed correctly if the unexpected happens.
Losing Capacity Does Not Suspend Your SMSF's Obligations. An Enduring Power of Attorney Does Not Either.
Most people think about an enduring power of attorney as a document that allows someone they trust to make medical and personal decisions on their behalf if they become incapacitated. What most SMSF trustees do not consider is the specific impact that losing capacity has on their fund’s trustee obligations and the compliance consequences that follow if those obligations cannot be met because no one is legally authorised to act.
An SMSF trustee who loses mental capacity can no longer legally act as trustee of the fund. Under the superannuation legislation, a trustee who is a disqualified person, including a person who lacks legal capacity, cannot continue in the trustee role. If the trustee cannot be replaced promptly, the fund may be at risk of losing its complying status, which would expose its entire asset base to the non-complying tax rate of 45 percent.
An enduring power of attorney addresses this risk by authorising a nominated attorney to act on behalf of the incapacitated trustee in both personal and financial matters. For SMSF purposes, the attorney can step into the trustee role, manage the fund’s ongoing obligations, and ensure the fund continues to operate compliantly until a more permanent solution, such as a trustee change or a fund wind-up, can be implemented.
However, not every enduring power of attorney is sufficient for SMSF purposes. The document must specifically address the trustee’s SMSF responsibilities, be consistent with the fund’s trust deed, and be prepared in accordance with the relevant state legislation governing powers of attorney. A generic enduring power of attorney that does not address the SMSF context may not give the attorney the authority needed to act as trustee of the fund.
At New Wave SMSF, we prepare enduring powers of attorney for SMSF trustees as part of an integrated legal and estate planning service. Every document is prepared with full reference to the fund’s trust deed, the superannuation legislation, and the member’s broader estate plan.
This information is general in nature and does not constitute legal advice. Legal services are delivered by New Wave Law, part of the New Wave Group. Before acting on any information on this page, please seek advice from a qualified legal practitioner.
What Our Enduring Power of Attorney Service Covers
We prepare enduring powers of attorney for SMSF trustees that address both personal and financial decisions, with specific reference to the trustee’s SMSF obligations.
Financial Enduring Power of Attorney
We prepare financial enduring powers of attorney that authorise a nominated attorney to manage the trustee’s financial affairs, including their SMSF trustee responsibilities, if they lose capacity. The document is prepared with specific reference to the SMSF context, ensuring the attorney has the authority required to act as trustee of the fund and manage its ongoing compliance obligations.
Personal and Health Enduring Power of Attorney
We prepare personal and health enduring powers of attorney that authorise a nominated attorney to make personal lifestyle and medical decisions on behalf of the member if they lose capacity. A complete estate planning arrangement includes both financial and personal enduring powers of attorney, ensuring every aspect of the member’s affairs can be managed by a trusted person if the unexpected happens.
Attorney Selection and Guidance
We advise on the selection of an appropriate attorney, the scope of authority to be granted, and any conditions or limitations that should be included in the document. Selecting the right attorney and defining the scope of their authority correctly is as important as the document itself. We ensure every client understands the implications of their attorney appointment before the document is executed.
SMSF Trust Deed Consistency
We review the fund’s trust deed in conjunction with the enduring power of attorney to ensure the attorney’s authority to act as trustee is consistent with the deed’s provisions. Where the deed requires a specific process for a trustee change or for a trustee acting under a power of attorney, we ensure the enduring power of attorney is prepared in a way that satisfies those requirements.
What Happens to Your SMSF If You Lose Capacity Without an Enduring Power of Attorney
The practical consequences of an SMSF trustee losing capacity without an enduring power of attorney in place are serious and can escalate quickly. Understanding what happens in this scenario helps trustees appreciate why the enduring power of attorney is not an optional document.
Under the superannuation legislation, a trustee of an SMSF must not be a disqualified person. A person who lacks legal capacity is a disqualified person. When an SMSF trustee loses capacity, they must be replaced as trustee. The replacement process requires legal steps that take time, and during the period between the loss of capacity and the completion of the trustee replacement, the fund may be unable to meet its ongoing compliance obligations.
The practical implications include the inability to make investment decisions for the fund, the inability to authorise pension payments, the inability to execute documents required for the fund’s annual compliance, and in serious cases the inability to respond to ATO correspondence. If the fund falls behind on its compliance obligations during this period, the consequences can include late lodgement penalties, compliance action, and in extreme cases the loss of the fund’s complying status.
Where the incapacitated trustee is the only trustee of a single member fund, the situation is particularly acute. There is no other trustee to manage the fund’s obligations. Without an enduring power of attorney that specifically addresses the SMSF trustee role, the fund may require court intervention to appoint a new trustee, which is a time-consuming and expensive process that could have been entirely avoided with the right document in place.
For funds with a corporate trustee, the situation is somewhat different. The company continues as trustee but the incapacitated member can no longer act as a director of the trustee company. The replacement of the director requires legal steps that are simpler under a corporate trustee structure than under an individual trustee structure, but still require prompt action and proper documentation.
An enduring power of attorney that specifically addresses the SMSF context provides a clear, pre-authorised mechanism for managing the fund during the period of incapacity. The attorney can step into the trustee role, manage the fund’s obligations, and ensure the fund continues to operate compliantly until a permanent solution is implemented.
Common Enduring Power of Attorney Mistakes That Leave SMSF Trustees Exposed
These are the enduring power of attorney issues we most commonly identify when reviewing SMSF estate planning arrangements.
No Enduring
Power of
Attorney in
Place
Many SMSF trustees have no enduring power of attorney at all. In the event of sudden incapacity through illness, accident, or cognitive decline, the fund is left without a properly authorised trustee to manage its ongoing obligations. This is the most significant and most common gap in SMSF estate planning arrangements and one of the simplest to address with the right legal advice.
Generic Document Not Addressing SMSF Trustee
Role
A generic enduring power of attorney prepared without reference to the SMSF context may not give the attorney sufficient authority to act as trustee of the fund. The document must specifically address the trustee’s SMSF responsibilities and be consistent with the fund’s trust deed. A generic document that is silent on the SMSF context creates uncertainty about the attorney’s authority that may need to be resolved through legal proceedings.
Attorney Not Aware of SMSF Trustee Obligations
Appointing an attorney who is not aware of or prepared for the SMSF trustee obligations they may be required to assume creates a practical problem even where the legal document is sound. The attorney needs to understand what the role involves, where the fund’s records are kept, and who the fund’s advisers are. We advise on what the attorney needs to know and ensure the appointment is practically as well as legally effective.
Enduring Power of Attorney Not Coordinated With Will
An enduring power of attorney and a will are two different documents serving two different purposes but they need to be consistent with each other and with the broader estate plan. Where the two documents are not coordinated, the attorney’s authority during the member’s lifetime and the executor’s authority after the member’s death may overlap or conflict in ways that create legal complexity for the family.
Who This Service Is For
- Trustees Who Do Not Have an Enduring Power of Attorney
You are an SMSF trustee and you do not have an enduring power of attorney in place. You want a specialist legal team to prepare a document that covers both your personal affairs and your SMSF trustee responsibilities, ensuring your fund can continue to be managed correctly if you lose capacity.
- Trustees With a Generic Enduring Power of Attorney
You have an enduring power of attorney but it was prepared without reference to your SMSF and does not specifically address your trustee responsibilities. You want a specialist review of the existing document and a replacement or supplementary document that addresses the SMSF context correctly.
- Trustees Approaching Retirement or an Age Where Capacity Planning Is Relevant
You are approaching an age where planning for potential incapacity is a genuine practical consideration. You want your enduring power of attorney, your will, your binding death benefit nominations, and your broader estate plan all reviewed and coordinated as part of a comprehensive retirement and estate planning exercise.
- Trustees Who Want Their Estate Plan Reviewed Comprehensively
You want your complete estate plan reviewed, including your will, your binding death benefit nominations, your enduring power of attorney, and your SMSF arrangements, to ensure every document is current, coordinated, and working together to achieve your intended outcomes.
The New Wave SMSF Difference
Prepared With Full Reference to Your SMSF
Every enduring power of attorney we prepare is assessed against your fund’s trust deed and the superannuation legislation to ensure the attorney’s authority specifically covers the SMSF trustee role. You never receive a generic document that leaves uncertainty about the attorney’s authority to manage your fund.
Coordinated With Your Complete Estate Plan
At New Wave SMSF, your enduring power of attorney is prepared in coordination with your will, your binding death benefit nominations, and your reversionary pension strategy by New Wave Law and your financial planner within the same firm. Every document in your estate plan is consistent and works together to achieve your intended outcomes.
Practical as Well as Legal Effectiveness
We ensure your attorney appointment is practically effective as well as legally sound. We advise on what your attorney needs to know, how to ensure they have access to the fund’s records and advisers, and what steps should be taken to make the transition of authority as smooth as possible if the document ever needs to be activated.
Protect Your SMSF and Your Affairs With an Enduring Power of Attorney That Is Built for Your Circumstances.
An enduring power of attorney is one of the most important documents an SMSF trustee can have in place. Our legal team is ready to prepare yours today.
What Our Clients Say
We are proud to support SMSF trustees and individuals with professional accounting and financial services.
Disclaimer
This information is general in nature and does not constitute legal advice. Legal services are delivered by New Wave Law, part of the New Wave Group. The information on this page is intended as a general guide only and should not be relied upon as a substitute for professional legal advice tailored to your specific circumstances. Before acting on any information on this page, please seek advice from a qualified legal practitioner.