A recent case in the NSW Supreme Court reminds trustees of self-managed superannuation funds of their duties. In Basil Notaras v Brinos Notaras, the Court found that Brinos' failure to participate in his fund's administration and management, together with his misuse of those powers he did exercise, justified his removal as trustee.Jeff Holowaychuk
The Notaras brothers, Basil and Brinos, were the only two trustees and members of their self-managed superannuation fund. Following a breakdown in their relationship, Brinos used his powers as trustee to sell shares held by the fund and, in the name of the brothers as trustees of the fund, made withdrawals from the fund's bank accounts that exceeded his entitlement.
After completing the withdrawals, Brinos refused to take part in the management of the fund by failing to sign documents that were required to be lodged with the ATO.
You can read the full case here.
In the Court proceedings, Justice Rein exercised the Court's discretionary power to remove Brinos as trustee of the fund on the basis that:
As a result of these breaches, the Court concluded that Brinos could be removed and replaced as trustee under section 70 of the Trustee Act 1925 (NSW).
Under the SIS Act, fund trustees must fulfil a range of duties when managing and administering the fund. These include duties to:
In addition to these statutory duties, the common law imposes numerous additional obligations on trustees. These include duties to:
In New South Wales, the Trustees Act 1925 provides the Supreme Court with the discretion to remove a trustee from their position. In the Notaras case, Justice Rein found that a Court should only exercise this power where it was appropriate to do so considering all the circumstances. The Court must consider whether the removal of a trustee:
Similar legislative provisions govern the actions of trustees in other states. However, as the Notaras case was decided in NSW, it may inform, but is not binding on, the decisions of Courts in other jurisdictions.
For more information, contact Maddocks on (03) 9288 0555 and ask to speak to a member of the Superannuation team.
You can read articles on a wide range of SMSF topics, here.
  NSWSC 947.
Daniel is a Senior Associate in the Maddocks Tax & Revenue team.Daniel advises extensively in the following areas:
His advice covers both direct and indirect tax considerations.
Prior to joining Maddocks, Daniel worked at a Big Four Chartered Accounting Firm focusing on tax consulting for mergers and acquisitions.
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For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of their team.