Category Archives: Superannuation

Bar CPD Alert: Optimising Your Superannuation

This Wednesday 26 February 2014, the NSW Bar Association will host a CPD seminar “Optimising Your Superannuation” in the Bar Common Room from 5.15pm. To be presented by Vanessa Woodley, Financial Strategist at SentinelWealth, and chaired by Dominique Hogan-Doran, the presentation is designed to provide an informative overview of key superannuation concepts and strategies to optimise benefits to barristers. For full details, please click here. The seminar provides 1.5 points in the CPD Management Strand. Attendance is free and no registration is required.

Update: for Barristers, you can stream this CPD from the NSW Bar’s website: http://cpd-streaming.nswbar.asn.au/seminar/151 

Upcoming CPD on Optimising Your Superannuation

NSW Bar Association – CPD (Management Strand)

Please join me on Wednesday 26 February 2014 at 5.15pm in the NSW Bar Association Common Room when I chair this timely presentation by Vanessa Woodley of Sentinel Wealth.

Download Flyer

The session is designed to provide an informative overview of key superannuation concepts and strategies to optimise your benefits. It will address:

- What are the benefits and traps of superannuation?

- How can you optimise your contributions and withdrawals?

- How much is enough to fund your retirement?

- Should you make superannuation contributions, repay your mortgage or invest elsewhere?

- What do you need to consider when consolidating your superannuation accounts?

- Is a Self-Managed Super Fund (SMSF) right for you?

The session is suitable for barristers of all ages who are interested in optimising their superannuation benefits.

The event is co-hosted by the NSW Women Barristers Forum.

Registration Details

Superannuation law ~ not so simple

A salutary reminder of the complexities of advising superannuation fund trustees per French CJ:

“On its face it sounds like a narrow field of practice. In truth it requires a generalist’s skills.  It straddles private and public law. It involves the application of equitable doctrines, particularly the law relating to trusts and fiduciary obligations. It involves contractual relations between employers and employees and is affected by statutory regimes specific to superannuation and of more general application. Its development has been linked to that of industrial relations law. From time to time it engages with the Constitution. Overlapping regulatory arrangements affect the administration of superannuation funds and impact on the rights and duties of trustees and beneficiaries.The relevant regulators include APRA, ASIC, and the Commissioner of Taxation. The exercise of their powers may attract the application of that branch of administrative law which involves judicial review.”

http://www.hcourt.gov.au/assets/publications/speeches/current-justices/frenchcj/frenchcj15jul13.pdf

29 July 2013

Dominique Hogan-Doran is an Australian barrister. As part of her practice, she routinely advises trustees including the corporate trustee of a major industry superannuation fund.

This blog post does not constitute legal advice. Read further the DisclaimerLiability limited pursuant to a scheme approved under professional standards legislation.

Musings on a member’s interest in a superannuation fund

Most Australian superannuation schemes are constituted by trust deeds, and thus are most often characterised as funds in which a member is interested. However, it is still necessary to determine what is the true nature of a member’s interest in a superannuation scheme, because:

  • a member may have no interest (in a technical sense) in the fund
  • not every superannuation scheme is actually a fund
  • not every member who has an interest in a fund has the same kind of interest as every other member of every other fund.

The question whether an interest in a superannuation fund is an interest in property may arise in varied contexts, including when determining:

  • whether stamp duty is payable after a member transfers or agrees to transfer their interest in the fund, or declares a trust of that interest
  • whether there is a taxable capital gain under the income tax acts arising from a taxable event
  • whether the member has a right to approach a Court for relief for example in the event of non-payment of a benefit, or to compel the due administration of the fund
  • adjustment of property interests between separating married or de-facto couples
  • whether the interest becomes an asset in the member’s bankruptcy.

Because superannuation trusts are express trusts, the existence of the fiduciary relationship is unambiguous, so attention is rather directed towards the content of the relationship.  The trust instrument will define the rights, obligations and expectations. This can lead to some complex issues of attribution of responsibility where members are offered a role in investment choice. Most defined contribution superannuation funds offer their members a choice of alternative sub-funds into which their contributions can be placed; those alternatives may differ by risk level (conservative/balanced/aggressive), or by investment strategy (sustainable/ethical or passive/active/multi-manager). APRA has weighed in on the attribution of responsibility in that decision making, reminding trustees that a member’s investment direction does not relieve the trustee of the requirement to act prudently, nor divest the trustee of its duty to have regard to diversification, risk, liquidity and other factors when setting investment strategies.

Generally speaking, an employee’s interest in a superannuation scheme, whether the scheme be contributory or non-contributory, accumulation or defined end benefit, will be a beneficial interest in a trust estate governed wholly by the law of trusts, subject only to legislative intervention or administration action (see further The Hon. Justice Graham Hill, “The True Nature of a Member’s Interest in a Superannuation Fund” (2002) 5(1) Journal of Australian Taxation 1).

That is not to say that the member has any direct interest in the underlying assets of the trust fund. Usually each employee intended to benefit from a fund is neither the legal nor the beneficial owner of the amount that stands to the credit of his or her account from time to time with the fund until the happening of a prescribed event, such as retirement or death, that will crystallise the member’s “account” into an actual beneficial entitlement. (Re Coram; Ex parte Official Trustee in Bankruptcy v Inglis (1992) 32 FCR 250). This in turn proves problematic in the event of the fund itself (or a division of it) becoming insolvent.

Even where the member’s interest in the fund is properly to be characterised as an equitable interest, the member may also have a contractual right in relation to the scheme, particularly where the member is an employee. For example, provision of superannuation benefits may be a term of the contract of employment, although it is unusual for employees to be parties to the actual superannuation scheme deed. The status of members as employees generates “interesting wrinkles” in the regulatory framework (see eg Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004 (Cth) which permits most employees to choose a more suitable fund, although the Cooper Review revealed that the initiative has achieved only partial success).

In addition to the characterisation of the fund member as beneficiary or employee, they may also be characterised as a consumer or an investor, with superannuation funds only recently routinely exercising their voting rights.

Others go so far as to characterise them as a “financial citizen”, noting that a typical member is all of these at once (see further M Scott Donald, “What’s in a Name? Examining the Consequences of Inter-legality in Australia’s Superannuation System” (2011) 33 Sydney Law Review 295 at 298).

Superannuation is increasingly a privatised version of social security. Members have an individual and collective interest in ensuring that the compulsory superannuation system secures the financial benefits they expect will flow from their fund’s investments.  Self-managed superannuation funds are on the rise, but with no assurance that financial literacy rates will keep apace.

Unfortunately, the notion of members becoming the engaged financial consumer of the type assumed in the Wallis reforms, responsible for contributing to the governance of the systems in which they participate, still seems a long way off. Until then, the trustee’s central role as decision maker and communicator within the system will have the regulatory supervision of APRA and ASIC, and presumably the ever present spectre of (political) legislative intervention.

5 May 2013

Dominique Hogan-Doran is an Australian barrister specialising in commercial litigation, regulatory investigations and public inquiries. As part of her practice, she has advised superannuation trustees in relation to their equitable and statutory obligations, and assisted them in relation to investigations by APRA and ASIC. All opinions expressed are her own.

Liability limited pursuant to a scheme approved under professional standards legislation.

Disclaimer