Disputes Between Members of Self Managed Super Funds

Posted on July 1st, 2013

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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.  

Superannuation laws and the trust deed of a SMSF continue to apply to trustees and members even when there is a dispute between trustees, or the marriage or de facto relationship of trustees breaks down.    Trustees therefore need to ensure they comply with the law as your SMSF can be made non-complying.  If this occurs you will be subject to significant tax consequences and disqualified as a trustee, effectively stopping you from running a SMSF in the future.   One trustee or director of a trustee company cannot:

  • exclude another trustee from the decision-making processes;
  • ignore requests to redeem assets or to roll money over to another regulated complying super fund;
  • take any action that is not allowed by the SIS Acts or the SMSF’s trust deed.

A SMSF works like any other super fund but the responsibility of managing it rests solely with the trustees. As trustee you have control over and responsibility for your fund’s investment decisions. You also have to manage the fund’s legal responsibilities. Despite any difficulties you may have with an individual on a personal level, as a trustee you must continue to act in the best interests of all members at all times.

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.

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