Smsf – Reserves

By Author: James Keyes
Total Articles: 62
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There seems to be a common strategy of allocating member balances to reserves and then through voting powers (usually based on a members balance) ensuring that the reserve is protected.

Have these advisers considered page 13 of the Explanatory Memorandum ? When describing the new changes to the SIS Act and the insertion of Section 17A it is stated that the reason behind the change “will ensure that each member is fully involved and has the opportunity to participate equally in the decision making process….” How can one participate equally in the decision making process when voting is based on your member balance ?

Could this expose practitioners in the future when it comes to family law settlements ? An example, child is a member of the family SMSF. The father based on the fact he has the highest member balance votes to distribute a significant portion of the funds to a reserve.

Wife gets divorced from child. Wife sees barrister and in court they claim the father has breached his duty as a director of the trustee company. They want civil and criminal action taken against him. How is the father going ...
... to argue against the provisions in the Explanatory Memorandum ?

Be careful with using reserves and basing decisions on members balances.