When death benefits are available to creditors of a bankrupt

Posted on September 15th, 2017

When it comes to bankruptcy and superannuation, it is well established that a lump sum death benefit payment from a regulated super fund to a bankrupt is not available to creditors. The 2016 Federal Court decision of Trustees of the Property of Morris (Bankrupt) v Morris (Bankrupt) [2016] FCA 846 confirmed this.

In July of this year the Federal Court again looked at the issue of bankruptcy and superannuation death benefits, but from a different perspective.

In the case of Cunningham (Trustee) v Gapes, in the matter of Gapes (Bankrupt) [2017] FCA 787, the question asked of the Court was whether a death benefit which passed through the estate of a deceased, and was ultimately distributed to a bankrupt, was protected from creditors. The short answer – no. Read the rest of this entry »

Self managed superannuation funds, defined benefit interest rates for 2017

Posted on August 21st, 2017

Superannuation assets in aggregate were almost $2.3 trillion at the end of the March 2017 quarter and are now at an all time historical record level.

It is possible to split the superannuation entitlements of married (and de facto couples, except in Western Australia) as part of a property settlement adjustment.   Such splits need to be the subject of a Court order or a Superannuation Agreement entered into strictly in accordance with the Family Law Act.  Read the rest of this entry »

Superannuation death benefits

Posted on February 9th, 2017

If a member of a superannuation fund dies (the deceased) there are a number of elements that determine how their superannuation death benefit will be paid.  These include the terms of the fund’s trust deed, applicable trust laws, the Superannuation Industry Supervision Act 1993 and Regulations (SIS) and the Income Tax Assessment Act.

SIS Regulation 6.22 provides that the trustee can pay a death benefit to any dependent of the deceased or to their Legal Personal Representative (LPR).

Read the rest of this entry »

Self-managed superannuation funds (SMSF) & enduring power of attorneys (EPOA)

Posted on December 21st, 2016

The following example from a draft tax ruling illustrates some of the issues in respect to Self-Managed Superannuation Funds (SMSF’s) and Enduring Power of Attorneys (EPOA).  If this prompts a query from you, give us a call:

EXAMPLE:  Clare is the sole member of a SMSF.  The SMSF trustee is Clear Pty Ltd and Clare is its sole director. The responsibilities of being director of the trustee company of the SMSF have become too difficult and time consuming for Clare. Read the rest of this entry »

Rights between joint guarantors

Posted on December 19th, 2016

The NSW Supreme Court recently dealt with a claim for contribution between multiple guarantors.  In simplified form a company “OD” loaned money to an incorporated legal practice.  The loan was guaranteed by three individuals and a further company Trout Hall “Trout”.  The loan was not repaid.  Two of the three individual guarantors became insolvent.  The lender sued the remaining individual guarantor, Mr Robert Clancy, and he cross claimed against Trout. joint guarantors rights

Prior to final hearing Mr Clancy paid an amount to the lender to settle the claim against him.  Ultimately, the Court held that Mr Clancy had paid more than required. Trout argued in its defence that because of the payment by Mr Clancy no amount remained owing from it to the lender.  It seems the lender accepted that argument because the claim between the lender and Trout also resolved. Read the rest of this entry »

Traps with Powers of Attorney

Posted on September 20th, 2016

Traps with Powers of Attorney Tony Cavanagh is a Director at Mullane & Lindsay in Newcastle and specialises in commercial dispute resolution & litigation, and employment law.

The NSW Supreme Court recently dealt with a case about the transfer of a property under a Power of Attorney (PoA). Briefly, a Mrs Cohen, an elderly and infirm lady, granted a PoA to her son. The son was also the sole beneficiary of the only known Will of his mother.

The son used the PoA to transfer a home unit from her name to his. This particular PoA expressly permitted the son to confer a benefit on himself.

By the time of the hearing Mrs Cohen was in aged care; the cost of her care exceeded her pension; and the NSW Trustee & Guardian had been appointed to manage her financial affairs. It wanted to sell the unit, to release funds to be used for Mrs Cohen’s care. It argued the transfer was improper, despite the PoA allowing the son to benefit himself. Read the rest of this entry »

How will bankruptcy affect your superannuation?

Posted on August 26th, 2016

Bankruptcy and SuperannuationKatie Thompson is a Solicitor at Mullane & Lindsay in Newcastle and specialises in commercial dispute resolution & litigation, and employment law.

A person’s superannuation interests are generally not a type of property that is available to be divided among creditors in the event of bankruptcy. However, there are other legal and financial hurdles that a bankrupt person may face if their superannuation interests are held in a self-managed superannuation fund (SMSF).

According to the Superannuation Industry (Supervision) Act 1993 (SISA) a bankrupt person is disqualified from acting as trustee of any SMSF or as director of the SMSF’s corporate trustee. Therefore, a bankrupt person cannot remain a member of the SMSF because in order to qualify as a SMSF each member of the fund must be either a trustee or director of the SMSF’s corporate trustee. If the SMSF does not meet this requirement, it could result in the income of the fund being taxed at a rate of 45%. Read the rest of this entry »

Overseas members SMSF – beware

Posted on November 13th, 2015

By Robert Lindsay

Robert Lindsay is a Director at Mullane & Lindsay in Newcastle and leads our Commercial & Property Law team.

If a member of a Self-Managed Superannuation Fund (SMSF) spends more than two years overseas then he or she risks losing one half of their SMSF member entitlements. It is usual for the members of a SMSF to be the trustees unless the SMSF has a corporate trustee, in which event each member of the SMSF must also be a shareholder and director of the corporate trustee.

For an SMSF to be a complying fund and to receive concessional tax treatment, it must be an Australian resident fund. A real risk exists if members spend time working overseas. Residency rules apply. The residency rules provide that central management and control of the SMSF must be in Australia. If a trustee or director is absent from Australia for a continuous period of two years, then he or she may jeopardise the fund’s complying status. If however the trustee or director returns to Australia and remains for a minimum period of 28 days within the two year period, then the risk is removed. Read the rest of this entry »

Self managed superannuation funds (SMSF), Defined benefit interest rates for 2015/2016

Posted on June 19th, 2015

by Mark Sullivan

Mark Sullivan is a Director at Mullane & Lindsay in Newcastle and specialises in Family, Relationship and Matrimonial Law

The importance of superannuation as a part of a couples’ wealth and financial resources cannot be understated. Australian’s superannuation assets totalled $2.05 trillion at the end of the March 2015 quarter.

It is possible to split the superannuation entitlements of married, de facto and same sex couples as part of a property settlement adjustment.   Such splits need to be the subject of a Court order or a Superannuation Agreement entered into strictly in accordance with the Family Law Act. There are exclusions for de facto and same sex couples resident in Western Australia. Read the rest of this entry »

Superannuation and binding death benefit nominations

Posted on May 22nd, 2015

By Robert Lindsay

Robert Lindsay is a Director at Mullane & Lindsay in Newcastle and leads our Commercial & Property Law team.

Many individuals or families have their own self managed superannuation funds (SMSF). Superannuation is paid after a member’s death at the discretion of the Trustee of the fund. However, if the Trust Deed creating the superannuation fund provides for a Binding Death Benefit Nomination then a member of a fund can direct the Trustee of the superannuation fund how the superannuation should be paid in the event of the member’s death. The member can remove the discretion of the Trustee. However, it is very important to ensure that the Binding Death Benefit Nomination form is valid. The recent decision of Munro v Munro in the Supreme Court of Queensland is a reminder of the care that is required. In that case Mr Munro, a retired solicitor established a self managed superannuation fund in 2004 with his wife and himself as Trustees. In 2009 he signed what purported to be a Binding Death Benefit Nomination in favour of “the Trustee of Deceased Estate”. Unfortunately, however the Nomination failed. Clause 31.2 (b) of the Trust Deed creating the superannuation fund provided that the Nomination in a Binding Death Benefit Nomination form must be in favour of one or more nominated dependents or the legal personal representative of the member. Read the rest of this entry »

Total and permanent disability insurance

Posted on February 27th, 2015

by Tony Cavanagh

Tony Cavanagh is a Director at Mullane & Lindsay in Newcastle and specialises in commercial dispute resolution & litigation, and employment law.

Many Australians now have Total and Permanent Disability Insurance (TPD), particularly self employed individuals. Commonly, TPD is arranged through a superannuation fund and both the fund trustee and the insurer have to be satisfied of an entitlement to a policy benefit before it will be paid.

In Banovic v United Super Pty Ltd [2014] NSW SC 1470, a manual labourer who injured an arm made a claim for a TPD benefit. Eligibility depended on him proving that he was unlikely to ever be able to engage in “any” occupation for which he was suited, by reason of ‘education, training or experience’. The medical evidence showed he would never return to heavy labouring; but the claim was declined on the basis that there were other jobs, that were less physically demanding, that Mr Banovic could still perform. Read the rest of this entry »

SMSF & Family Law: Be alert!

Posted on February 26th, 2015

by Mark Sullivan

Mark Sullivan is a Director at Mullane & Lindsay in Newcastle and specialises in Family, Relationship and Matrimonial Law

New laws applying to SMSF contraventions commenced after 1 July 2014 and imposed administrative penalties, education directions and rectification directions on defaulting trustees.  Trustees can be personally liable for penalties of up to $10,200 per breach and may be directed by the ATO to rectify the contravention and undertake an SMSF education course.

If your relationship has broken down and you have an SMSF with your ex partner/spouse then be on notice that your responsibilities as a trustee or trustee director continue until your SMSF is wound up, or you have rolled your interest out of the fund into some other complying Fund and resigned as a director/trustee.  You are therefore still at risk and need to act with care and diligence. Read the rest of this entry »

Does your self managed superfund comply with its obligations?

Posted on February 5th, 2015

by Tony Cavanagh

Tony Cavanagh is a Director at Mullane & Lindsay in Newcastle and specialises in commercial dispute resolution & litigation, and employment law.

Self managed superannuation funds (SMSF’s) are a fact of life in Australia. On some measures, they collectively hold much greater wealth than either industry or retail funds, although many of them are relatively small in terms of the wealth they control. Despite that, SMSF trustees must comply with their trustee obligations, including under the Superannuation Industry (Supervision) Act 1993 (‘SIS Act’) or they risk significant consequences – both for the SMSF and for themselves personally. Read the rest of this entry »

SMSF, Family law and new ATO penalties

Posted on December 1st, 2014

by Mark Sullivan

Mark Sullivan is a Director at Mullane & Lindsay in Newcastle and specialises in Family, Relationship and Matrimonial Law

When a relationship breaks down and the parties have a SMSF together it is often in both parties’ interests for their SMSF to be wound up, or for one party to roll out of the fund into some other complying Fund. A clean break in such circumstances is generally a good thing.

In negotiating property settlements for clients it occasionally came to light that there were breaches of superannuation legislation which placed the parties at risk of penalty. A SMSF that was declared to be non complying caused great loss of wealth to the parties. Such issues with the ATO therefore needed to be remedied as part of any settlement. Read the rest of this entry »

Superannuation and family law – Part 2

Posted on September 1st, 2014

by Mark Sullivan

Mark Sullivan is a Director at Mullane & Lindsay in Newcastle and specialises in Family, Relationship and Matrimonial Law

If a superannuation splitting order is made as part of a property settlement between a married or de facto couple whose relationship has broken down, such orders typically allocate a base amount or prescribe a percentage sum to the party who is not a member of the super fund.   The non member spouse will receive an entitlement for the allocated base sum or prescribed percentage and the member spouse’s interest in the fund will then be reduced by a corresponding sum.

The super splitting order needs to be served on the trustee of the member spouse’s superannuation fund with details of the non member spouse’s address and date of birth and the order becomes operative generally within 4 days of service.

Read the rest of this entry »

Superannuation and family law – Part 1

Posted on September 1st, 2014

by Mark Sullivan

Mark Sullivan is a Director at Mullane & Lindsay in Newcastle and specialises in Family, Relationship and Matrimonial Law

Superannuation is treated as property for the purposes of jurisdiction for both matrimonial and de facto financial causes.   The Family Court and the Federal Circuit Court have jurisdiction under the Family Law Act to determine matters relating to a superannuation interest held by a member of an eligible superannuation plan.

S.79 empowers these courts to alter the interests that parties to proceedings have in relation to property and superannuation. Orders made under s.79 in relation to superannuation must be orders to split payments to a party with a superannuation interest; they do not split the underlying interest.   Trustees of superannuation funds are bound by payment splitting orders if they have been accorded procedural fairness to comment on the proposed orders before they are made.

Read the rest of this entry »

The legal personal representatives of a deceased person entitlement to payment

Posted on September 1st, 2014

by Mark Sullivan

Mark Sullivan is a Director at Mullane & Lindsay in Newcastle and specialises in Family, Relationship and Matrimonial Law

Q: How should the legal personal representatives of a deceased person deal with entitlement to payment on the deceased’s superannuation upon death?

A: read on…

Our office was recently discussing all things Queensland – and it wasn’t only the State of Origin series. Judgment in a Queensland Supreme Court case of McIntosh v McIntosh [2014] QSC 99 was delivered in mid May and its potential impact on the community was not lost on the trial judge. Justice Atkinson wrote:

This decision deals with an area of the law which has growing practical importance in view of the growth of personal superannuation: how should the legal personal representative of a deceased person deal with the entitlement to payment of the deceased person’s superannuation upon death. As can be seen from this case, the amount invested in superannuation and receivable by way of death benefit may be well in excess of the amount of funds in the estate. Read the rest of this entry »

Borrowing by Self Managed Superannuation Funds

Posted on December 1st, 2013

by Robert Lindsay

Robert Lindsay is a Director at Mullane & Lindsay in Newcastle and leads our Commercial & Property Law team.

For several years, self managed superannuation funds have been permitted to borrow money to assist with the purchase of Real Estate. However if a Self Managed Superannuation Fund (SMSF) proposes borrowing then the trustee of the SMSF must be careful.

The property purchased by the SMSF must be held by a bare trustee which holds the property as trustee for the SMSF (which is the beneficial owner of the property). The documentation relating to the purchase of the property by the bare trustee must be in place before the property is purchased. The security for the loan is the property and the mortgage is a special type of mortgage referred to as “limited recourse”. This means that if the SMSF defaults with its repayments then the lender can only sell the property to recover the loan. Naturally, the margin between the loan and the value of the property being purchased is usually greater when a property is purchased by a SMSF.

Read the rest of this entry »

Disputes Between Members of Self Managed Super Funds

Posted on July 1st, 2013

by Mark Sullivan

Mark Sullivan is a Director at Mullane & Lindsay in Newcastle and specialises in Family, Relationship and Matrimonial Law

In a recent Supreme Court action involving 2 brothers who were the sole members and trustees of a SMSF the Court heard evidence of the breakdown of the brothers’ relationship, neglect to sign trust records and the unauthorised withdrawal by one brother of sums from the SMSF that exceeded his entitlements.   The Court ordered the replacement of the brother as trustee due to his breach of fiduciary duties, and that he also account for the money he withdrew from the fund without consultation.

In reaching its decision to replace the trustee the Court had regard to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trust.   Read the rest of this entry »

ATO contacting employers regarding superannuation changes applying from 1 July 2013

Posted on June 1st, 2013

by Mark Sullivan

Mark Sullivan is a Director at Mullane & Lindsay in Newcastle and specialises in Family, Relationship and Matrimonial Law

Over 850,000 Australian business owners are in the process of receiving advice on new superannuation obligations from the ATO to ensure they are adequately prepared for changes to superannuation.

From 1 July 2013 employers must:

  • increase the minimum rate for super guarantee payments on behalf of their employees from nine to 9.25 per cent; and
  • start making super guarantee contributions for employees aged 70 years and over with the removal of the existing upper age limit.

These are the first part of changes to be implemented over a 6 year period.   In superannuation law, change remains the constant.

Mark Sullivan is a Director at Mullane & Lindsay, and practises extensively in Family, Relationship and Matrimonial Law. If you require any assistance in this area please contact Mark Sullivan to arrange a consultation or contact our Newcastle office.