Why Capacity Matters

If a member can no longer make financial decisions, they may be unable to continue acting as trustee of the SMSF. Without appropriate arrangements, the fund may breach superannuation laws and face administrative difficulties, disputes or penalties.

The Role of an Enduring Power of Attorney

An enduring power of attorney (EPOA) is one of the most important documents for SMSF succession planning.

An EPOA allows a trusted person to manage financial and legal affairs if the member loses capacity. Under superannuation laws, that attorney can generally step in as trustee, or director of the corporate trustee, in place of the incapacitated member.

Without an EPOA, family members may need to apply to a tribunal or court for authority to manage the member’s affairs, which can be costly and time-consuming.

Corporate Trustee vs Individual Trustees

A corporate trustee structure often makes incapacity situations easier to manage.

With individual trustees, changes usually need to be made to trustee records and ownership of assets. By contrast, a corporate trustee generally allows smoother succession because the company remains the legal owner of the fund assets.

Practical Steps for SMSF Members

To reduce risk and ensure continuity, SMSF members should:

• put an enduring power of attorney in place
• review their SMSF trust deed
• consider using a corporate trustee
• regularly update estate planning documents
• obtain legal and financial advice

Conclusion

Loss of capacity can significantly affect the operation of an SMSF. Proper planning — particularly through an enduring power of attorney and appropriate trustee structures — can help protect the fund, maintain compliance and avoid disputes.

If you would like advice about SMSF succession planning or enduring powers of attorney, our team can assist.