Small APRA Fund (SAF) Recommendation

[kristaje]

Hi All,

We have an SMSF which invest in a couple of properties. With us living overseas for almost 2y now, the fund is running the risk of being considered non-compliant, which carries very hefty repercussion. As such, we are looking at converting it into a Small APRA Fund (SAF).

I've been checking few SAF providers and their fees, and was very discouraged by how high they are! Our SMSF is not big and most SAF charges around $5,000 pa for $200k fund! Just wonder if any of you could recommend an affordable SAF?

Thanks.

 

[Paul@PFI]

Paul

I'm a accountant who works extensively in the SMSF area. I'm also a fan of the SAF in some instances.

Few trustees understand some of the prudential risks and risks to SMSF balances in the estate planning context. For example:
- Old clients
- Widow / Windower
- No dependants
- Couples in matrimonial strife : BOTH move to SAF until Family Court issues are determined !!
The concern is who will manage the SMSF if someone becomes old, sick, injured, dementia etc???? I have seen a sad dementia case where fund went non-compliant overnight. Kids who steal ?? - Read the decision in the Spry case and it makes your toes curl. What about a adult child mismanaging your last $$$ by investing how they want rather than how you want? No thanks. What about it being unmanaged and left at 0.01% cash instead ?? Thats not great too. A SAF allows YOU to approve an investmnet strategy you design if you want. You can manage risk & return while fit and healthy then allow them to do it later. Clients who have done this have comfort from knowing its independently protected.

SAFs are limited in offers. I have one trustee I prefer as they offer good choices prior to handing control to them. They allow direct property etc. All have tight rules, limits etc but tmy preferred SAF trustee isnt that expensive. Remeber they do ALL the work, admin and includes a lot. Includes APRA trustee protection too. No "Spry" probems !!!!

I would think your fund may already be non-compliant. The two year rule isnt something to consider after two years !! There can be a straegy using enduring power of attorney also.

Happy to advise you

 

[brucea]

Rather than becoming a SAF do you have one trusted person in Australia who could act as director of a corporate trustee under a power of attorney (which Paul mentions above)? Or two trusted people if you prefer not to use a corporate trustee? Cost of the power of attorney option is zero.

 

[kristaje]

Hi Paul and Bruce,
Thanks for your replies.

Paul - thanks also for kindly provide me with some info on your trustee. I'm currently going through the checklist process with them, to see if they could take our smsf.

Bruce - we do use corporate trustee at the moment, but prefer not to hassle my young sister-in-law too much if possible, so are exploring the SAF avenue first.

Re. Power of Attorney for smsf and change of director, I heard that this needs to be setup prior to us leaving Australia, is this the case or will we have a chance to set this up afterwards? We have a PoA letter signed with our accountant before we left (but had not install him as director of smsf yet), but found him not very cluey on the whole expat matters, so are looking to change accountant.

Thanks.

 

[brucea]

...Re. Power of Attorney for smsf and change of director, I heard that this needs to be setup prior to us leaving Australia, is this the case or will we have a chance to set this up afterwards? We have a PoA letter signed with our accountant before we left (but had not install him as director of smsf yet), but found him not very cluey on the whole expat matters, so are looking to change accountant.

If you are thinking about changing your accountant then it sounds like having them appointed as your attorney is something you need to fix quickly.

If there's another option, such as your sister-in-law, then they could be the attorney appointed yet still outsource the work to someone else. And you can still take a great interest from overseas in the details of the fund as long as the ATO sees control of the fund being from within Australia and your sister-in-law is happy to do some mechanical things like signing paperwork like the annual return and referring anything she receives in the mail and isn't sure about to you.

The person appointed under the POA becomes trustee and director in your stead. You should minute the changes in your fund/company records and will also need to update the director details with ASIC (being mindful of how many days they allow for the notification before spitting out a fine) and you'll need to change the SMSF details with the ATO so that they know the person appointed is now a trustee/director rather than you. These things could be done from overseas but I reckon they'd be far more easily sorted out from within Australia unless the person appointed was savvy about SMSFs and being a director in which case you could let them do it using the POA.

The existing POA can be revoked and a new one drawn up whilst you are still overseas. I believe you can get someone like an Australian consular officer or a notary to witness the documents and certify copies as being true copies but that's a question for someone with better legal knowledge than mine. If you have an embassy that's easily accessible they'll hopefully be able to tell you what they can and cannot do.

 

[Terry_w]

Re. Power of Attorney for smsf and change of director, I heard that this needs to be setup prior to us leaving Australia, is this the case or will we have a chance to set this up afterwards? We have a PoA letter signed with our accountant before we left (but had not install him as director of smsf yet), but found him not very cluey on the whole expat matters, so are looking to change accountant.

Thanks.

You need to appoint an 'enduring power of attorney' for attorney to act for you in a SMSF. An enduring one is one which will operate if you lose capacity. It has to be explained to you by a solicitor who signs a declaration that they have done this.

Being an Attorney is a serious job and not something that a professional would do without payment - because of the risk and time involved.

Probably better appointing a relative or two.

 

[kristaje]

many thanks Bruce & Terry for the information, much appreciate them.

the verification process for SAF turns out to be very stringent (for the trustee we're looking at anyways), as our smsf is skewed very much towards property at the moment. hopefully we could know if we can do it sometimes next week - else fail we need to discuss with SiL re. EPOA.

btw - just realised that i wasn't subscribed to this thread. had done it now so i get updates on any info by email.