superannuants travelling overseas

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Advice on travelling overseas and your New Zealand Superannuation

By Julia Bergman, MSD’s General Manager – International, Disability and Generational Policy

W ith the international border reopened and the global environment settling into a new normal, you may be thinking about spending some time overseas. If you are planning an overseas trip, you may be able to continue receiving your New Zealand Superannuation (NZS) or Veteran’s Pension (VP) but there are a few important things to note before you go.

Travelling overseas for 26 weeks or less – If you travel overseas your NZS payments can continue for up to 26 weeks while you’re away provided you return to New Zealand within 30 weeks. You must remain ordinarily resident in New Zealand, meaning that you primarily live in New Zealand and consider it your home.

If you receive any other payments from the Ministry of Social Development, such as the Winter Energy Payment (WEP) or Accommodation Supplement, these will stop if you are away from New Zealand for more than 28 days. The Winter Energy Payment is payable up to 28 days during the winter period from 1 May to 1 October.

Travelling overseas for more than 26 weeks – If you intend to travel overseas for more than 26 weeks, you must apply for General Portability payments at least six weeks before you leave New Zealand. To be eligible to receive portable payments you need to have qualified for NZS in your own right and be ordinarily resident in New Zealand when you apply.

General Portability payments are not the same as your full NZS entitlement and instead reflect the number of years you have resided in New Zealand, meaning the amount you get depends on your individual situation.

If you do not apply for General Portability payments before you leave and stay away longer than 26 weeks then you risk losing your payments and may also be required to repay the 26 weeks of payment you received.

We’re here to help – MSD’s International Services team specialise in paying New Zealand benefits and pensions overseas. They are the best people to contact for any questions about getting your New Zealand Superannuation or Veteran’s Pension if you want to travel or live overseas.

For more information, or to make an application for General Portability payments, please contact us at:

International Services, Ministry of Social Development, PO Box 27-178, Wellington 6141, NZ. Ph (from NZ): 0800 777 227. Email [email protected] www.workandincome.govt.nz/pensions/travelling-or-moving/going-overseas-super

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Work and Income payments and NZ Super

Page updated:27/2/24 Print page

Travelling overseas while receiving Work and Income payments, including NZ Super

If you receive a benefit or other payment, you must let Work and Income know of your travel plans and your reasons for travel before departing New Zealand. Partners travelling must also inform Work and Income.  If you don't do this, your payments will stop. 

If you receive NZ Superannuation (NZ Super) or Veteran's Pension and plan to go overseas for 26 weeks or less, you may also need to let Work and Income know.  If you're planning to go overseas for more than 26 weeks, you must meet certain criteria and apply to keep receiving NZ Super or Veteran's Pension.

See the Going overseas page on the Work and Income website for information about when you need to contact Work and Income and how you can do this, including online options. 

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Superannuation and retirement planning information

Home / Retirement planning / Key issues to consider / Retiring overseas: Implications for your super and tax

Retiring overseas: Implications for your super and tax

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Why do Australians want to retire overseas?

Pros and cons of retiring overseas, can i access my super, you can still get the pension, what about healthcare, consider the tax implications, the bottom line.

Australians are inveterate travellers, so when it comes time to retire it’s probably not surprising that many dream about retiring overseas.

In fact, the number of Australians retiring overseas was increasing dramatically until the COVID-19 pandemic hit and international borders were slammed shut.

In 2018–19, the last full financial year before COVID, 9,150 Australians aged 65 and over emigrated from Australia. According to the Australian Bureau of Statistics (ABS), this was up 18% on the previous year and up 66% over the decade.

By 2020–21, only 5,610 of Australians aged 65-plus retired overseas, down 39% on the previous year and down 7% over the decade. More recent figures are not yet available, but it will be interesting to see whether the trend resumes once the pandemic is behind us.

The most popular retiree destinations for Australians include New Zealand, Italy, Greece, Spain and Portugal. Asian destinations including Thailand, Malaysia, Vietnam, Bali and Cambodia are also attractive because of their proximity and low cost of living.

Retiring overseas can have big implications for your super and tax and it’s wise to seek detailed financial, super and tax advice from a financial planner before you start to make plans to relocate.

The main reasons for leaving Australia and retiring overseas include:

• Family ties – being closer to adult children and grandchildren or extended family in country of birth
• A desire for travel, warmer weather or to live in a new culture
• The cheaper cost of living in some countries compared to Australia
• The cost of housing, inadequate social security payments and everyday living expenses in Australia

If you’re considering making the move overseas and are doing research about cost of living in different countries,  Numbeo has detailed analysis .  International Living  compiles an annual ‘Best places to retire’ list which is US-centric but still a useful place to start your research.

The ASFA Retirement Standard estimates a comfortable retirement lifestyle in Australia will cost a couple almost $72,000 a year and singles around $51,000. For anyone who relies on the Age Pension this is a stretch, especially if you don’t own your home and/or have a limited amount in super. So, it’s worth checking out what it may cost you to live in your preferred country.

The potential advantages (dependent on location) of retiring overseas include:

• Cheaper food and living expenses, for example, utilities and transport
• Cheaper property prices, renovation costs and rent
• Accessibility to high quality, affordable healthcare
• Increase in desirable lifestyle factors, for example less stress and more disposable income.

Possible disadvantages include:

• Forfeiting Medicare benefits after five years
• Cost of health insurance cover
• Tax implications for remaining Australian assets
• Inability to transfer super overseas (except to New Zealand – see below)
• Leaving behind family and friends.

What happens to your super depends on your residency status – either Australian citizen/permanent resident, or a temporary resident – and whether you meet a condition of release.

If you are an Australian citizen or permanent resident you will be able to access your super provided you meet the normal conditions of release, or you’re moving to New Zealand, which allows you to transfer your super to a KiwiSaver account. While super pensions and lump sums are generally tax free for retirees once you turn 60, some countries may levy tax on your income or ‘wealth’.

If you are a temporary resident, you may be eligible for a departing Australia superannuation payment (DASP), in which case you can contact your fund trustee to request the release of your super.

SMSFs also have strict compliance rules about trustee control being based in Australia, which may have a big impact on your fund.

Whether you are a member of an APRA-regulated super fund or an SMSF, we strongly recommend you seek independent financial advice before you consider retiring overseas.

Read about the experiences of Australians who have retired overseas .

Learn more about the SMSF residency rules .

To receive the  Age Pension if you move overseas permanently , your pension may be reduced depending on how long you were an Australian resident.

Essentially the pension becomes an Outside Australia rate, which means some supplements and entitlements may be affected. As at September 2023, singles received a maximum $26,787 per year while couples received $40,487. (By comparison, the full rate for eligible pensioners living in Australia is $28,514 for singles and $42,988 for couples.) You must also meet the age requirements and pass the usual income and assets test. You can receive the pension into your foreign bank account.

Unless the country you retire to has a social security arrangement with Australia, you must apply for the Age Pension in Australia. If you already live overseas, you’ll have to return to Australia first. Australia has  International Social Security Agreements  with more than 30 countries that enable pension payments. If you’ve lived or worked in an agreement country before, or you live in an agreement country now, you can receive a part pension from that country and a part pension from Australia.

Healthcare is a major consideration for older Australians so access to affordable healthcare can be a game changer when retiring overseas.

If you remain an Australian resident for tax purposes, you may be able to use publicly-funded medical services in  countries with a reciprocal healthcare agreement . These agreements vary from country to country, so research thoroughly with your personal healthcare requirements in mind.

Generally, you will need to have a valid Medicare card and your Australian passport to receive treatment. You may also be asked to pay upfront and claim later or make a co-payment.

Good to know: If your Medicare card has an expiry date of less than five years, you won’t be able to renew your card while living overseas. Effectively, you can only claim benefits up to the expiry date of your card.

An alternative is international health insurance, but that can be costly.

Retiring overseas can have major tax implications, especially if you earn income from property or other assets in Australia.

For example, with  few exceptions , you are no longer eligible for the main residence capital gains tax (CGT) exemption on the sale of Australian property after 30 June 2020. And from 8 May 2012, foreign residents are ineligible for the full  50% CGT discount  on the sale of assets.

Ultimately, you need to consider whether or not you will remain an Australian resident for Australian tax purposes. More expensive countries are likely to tax your retirement income, less so for cheaper Asian countries. If you remain an Australian resident for tax purposes, you’ll typically be taxed on your global income from all sources, whereas foreign residents are only taxed by the Australian government on their Australian-sourced income.

However, as a foreign resident you’ll start paying tax on the first dollar earned here. Tax treaties with other countries affect the amount of tax you may have to pay. Investigate the tax laws of the country you want to retire to, for example in the areas of property and pensions.

Retiring overseas may be done for lifestyle or family reasons, but it can have major tax, super and financial consequences. For that reason, we strongly recommend you seek the advice of an independent financial planner before you go.

About the author

Barbara Drury

Barbara is a financial journalist and author with over 30 years’ experience in Australia and the UK. She is a contributor to The Sydney Morning Herald and The Age Money section , and has worked for the Australian Financial Review and The Australian .

Barbara is the author of Alan Kohler’s Eureka Report Guide to Personal Investing , Sorting Out Your Finances for Dummies and Personal Finance for Dummies and co-author of Investing for Dummies with James Kirby.

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NZ Superannuation overseas travel

Understand the rules around travelling or living overseas and getting nz super.

The New Zealand Government provides the ability to travel overseas while on NZ Super. Before you go, it is important to understand the rules and procedures so you don’t lose your benefit.

Pension Overseas Travel

If you’re currently receiving New Zealand Superannuation (NZ Super) and considering an extended stay overseas lasting more than 26 weeks, or even thinking about relocating permanently, there are vital details you should be aware of. This page provides an overview of what your rights are, but it is always best to contact the International Services of Work and Income to get the most up-to-date information.

The International Services, a branch of Work and Income, is dedicated to ensuring you receive the correct NZ Super amount when you’re abroad.

Key points to consider ?

• If you are receiving NZ Super, most people can still receive NZ Super payments while overseas providing they have followed the rules before departing New Zealand.
• Being away from New Zealand for less than 26 weeks is normally fine.
• More than 26 weeks, or moving away permanently, is covered by specific rules under the legislation that will affect your entitlement:
• The amount you receive may be less than the NZ Super you receive in New Zealand. This will depend on which overseas country you travel to.
• You should seek advice from International Services before making any decisions.

Travelling overseas up to 26 weeks

• Your NZ Super payment continues as usual for 26 weeks, but you must return to New Zealand before 30 weeks. If you receive extra payments like Disability Allowance, Accommodation Supplement, Winter Energy Payment, these will cease after 4 weeks absence.
• If, by your own choice, you decide to extend your stay beyond 26 weeks, your NZ Super payments will cease at 26 weeks.
• If you exceed 30 weeks away you may be required to repay 26 weeks of NZ Super. For more information please see the Work and Income website.
• If, due to unforeseen circumstances beyond your control, your stay is extended beyond 26 weeks you can apply for payment of NZ Super overseas. This is sometimes referred to as a portable pension. Portable pensions are not granted lightly and you will need to provide information about why you were unable to return to NZ as intended. Contact the International Services team for more information.

Travelling overseas more the 26 weeks

• If you intend to travel overseas for longer than 26 weeks you must apply to International Services at least 6 weeks before departing New Zealand.
• The amount you’ll receive depends on how long you have lived in New Zealand. This is calculated based on the time you’ve lived in New Zealand between the ages of 20 and 65 and may be less than the NZ Super amount you receive in New Zealand.
• You will not receive any extra payments such as the Winter Energy Payment.
• If you did not apply before you left New Zealand because you intended to return within 26 weeks and, due to unforeseen circumstances beyond your control, you are unable to return (eg the closure of the Australia/NZ COVID-19 travel bubble), you can apply for a ‘portable pension’.

The key point to note in all this is that if you are travelling overseas, particularly if over 28 days then it is worthwhile contacting the International Services team of Work and Income. They will help you comply and give you up-to-date information on whether your benefit will be impacted.

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What Happens To My Superannuation When I Move Overseas?

If you have superannuation in Australia, even if you’ve only worked in Australia as a temporary resident, you’re likely to have a Superannuation account. If you’re going back to your own country or if you’re a permanent resident, or an Australian citizen leaving australia permanently, or moving overseas indefinitely, you need to know what happens to your Superannuation. The Australian Taxation Office (ATO) advises that the laws surrounding what you can and cannot do with your Superannuation will depend on your status as a resident or citizen. Your particular situation could be different from others so you should seek the advice of a Superannuation specialist such as PK Simpson.

Our Superannuation lawyers at PK Simpson will inform you of everything you need to know about what happens to your superannuation when you move overseas based on your individual circumstances. This will depend on factors such as whether you’re an Australian citizen, permanent resident, temporary resident,  and more.

PK Simpson, Superannuation/TPD specialists – Our friendly team will make sure you’re looked after, and that every fund you’ve ever been a member of is looked into – You might have more than one claim.

I’m An Australian Citizen Leaving Australia Permanently

If you’re an Australian citizen or permanent resident who is moving overseas permanently or for an indefinite period, your Super will be subject to the same rules as if you were living here. This means your Superannuation has to stay untouched in your fund account until you reach preservation age and you’re eligible to withdraw it. As long as you’re an Australian citizen, what happens to your super when you leave Australia will remain the same as living in Australia as well.

Therefore, according to the ATO, you cannot gain access to the funds just because you are moving overseas to live. In other words, the regulations governing your Superannuation are the same whether you live in Australia or have moved overseas. Should you retire when you reach preservation age, or if you’re eligible under other reasons that allow a release of your funds, you may be able to gain access to them. You should refer to your superannuation withdrawal rules and seek the advice of a professional Superannuation lawyer to decide on the best course of action. You may be able to access your funda under the following conditions, but always talk to your Superannuation specialist for advice if you need a part or all of your funds because:

• Your home is going to be repossessed
• You are suffering severe financial hardship
• You are temporarily incapacitated
• You are permanently incapacitated
• You need palliative care
• Your home or car need to be modified
• You need to pay funeral expenses

At PK Simpson, 67 per cent of our new clients come to us via word of mouth – 33 per cent come to us because they’ve seen our ads. Our clients range from miners in far north Western Australia to abalone divers in Tasmania, truck drivers in Sydney and waitresses in Brisbane.

Can I Access My Super Early to Leave and Go Overseas?

No, you can’t. However, even if you’re overseas, your Superannuation nest egg will still be there growing all the while for when you retire or need to access it under the provision stated above. The rules of withdrawing Superannuation when leaving Australia still remains the same as long as you’re an Australian citizen or permanent resident. You are not allowed to take out super when leaving Australia until you have reached preservation age, which is when you’re eligible to access your Superannuation funds.

Should you be relocating overseas to work for an Australian employer, your boss may still be required to make Superannuation contributions on your behalf. In the situation where there is a double up of superannuation coverage according to different legislations in separate countries, Australia has bilateral social security agreements with several countries around the world to resolve these issues.

There is one exception you need to understand which that could possibly let you access your Australian super fund – specifically in the case of moving Superannuation from Australia to New Zealand . That is, if you are an Australian citizen claiming payments in New Zealand or intend to move to New Zealand, you can opt for the Trans-Tasman Portability Scheme which allows you to transfer your Superannuation into a KiwiSaver account. The same rules about accessing the fund when you retire etc. will still apply. There could be extra fees and rules surrounding this, however, and are only allowed to transfer from an Australian Prudential Regulation Authority regulated fund and no others, including self-managed funds.

Can I Contribute While I’m Overseas?

Possibly, but restrictions apply on contributions to self-managed Superannuation funds. If you have a self-managed super fund , we advise getting further information about your contributions by the Superannuation lawyer specialists at PK Simpson. Our legal team will be able to inform you of your self-managed super fund rules and your eligibility to contribute whilst overseas.

Those with other types of Australian Superannuation funds may still make personal contributions while they’re overseas to make sure their account grows and fees and insurance deductions are covered.

Temporary Residents

If you are a resident of another country and you’re working temporarily in Australia, you could be eligible to have your Superannuation money paid to you when you go back home. This is done through a ‘Departing Australia Superannuation Payment’. For more information on how to get your Superannuation back when leaving Australia as a temporary resident , or to apply, go to the ATO website(2).

No matter what your status, if you’re planning on departing from Australia to go overseas for an extended period it’s a good idea to do shop around for a fund that can offer you a choice of investments without charging excessive fees. Even if you are not contributing to your fund while you’re away, the best Superannuation funds invest in safe and rewarding options to help your balance grow.

At PK Simpson, our Superannuation lawyers will be able to assist you with moving funds if necessary as well ways on how to claim superannuation when leaving Australia as a temporary resident , and much more. Our experienced lawyers at PK Simpson ensure you’re getting the most out of your Superannuation funds in line with the relevant legislation and rules.

PK Simpson prides itself on being a firm that takes on any case relating to compensation, big or small. Call our law firm today on 1300 757 467 , send an email to [email protected] or enquire online now so we can help you.

References:

• https://www.ato.gov.au/Individuals/International-tax-for-individuals/Going-overseas/When-you-leave-Australia/#Yoursuper
• https://www.ato.gov.au/

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Government helps superannuitants and beneficiaries stuck overseas

• Hon Carmel Sepuloni
• Hon Tracey Martin

Over two and a half thousand New Zealanders stranded overseas who receive Superannuation, Veteran’s Pension or a main benefit, will keep being paid with a temporary relaxation in policy, Minister for Social Development Carmel Sepuloni and Minister for Seniors Tracey Martin announced today.

Changes will be introduced from 20 April 2020 and be in place for six months.

Carmel Sepuloni said these temporary changes will give relief to those senior New Zealanders and beneficiaries trying to return home but are unable to due to the strict global travel restrictions and border closures in place to fight COVID-19 .

“Payments from MSD generally stop when a person leaves the country. However from Monday , policy is to pay or resume payments on hold or stopped from the date that they had expected to return to New Zealand in circumstances where their return home was impeded by COVID-19 restrictions.”

Seniors Minister Tracey Martin said the changes will help all those superannuitants who have been caught by the shutdown in international travel.

“In the current situation, where it’s very difficult for people to return home, it makes sense to relax these rules and provide support,” she said.

Carmel Sepuloni adds that the MSD has been proactive in responding to impacts of COVID-19 by applying new ways of working to support more New Zealanders than ever before.

“But we are also aware we have superannuitants and beneficiaries that require flexibility and commitment to their well-being during this unprecedented time.”

MFAT is currently providing its largest ever consular assistance programme to help New Zealanders return home. Since 14 March, when the Government advised New Zealanders to avoid non-essential travel overseas around 80,000 New Zealand citizens and permanent residents returned to New Zealand. However many remain stranded offshore.   

Currently, there are 764 superannuitants and 1,871 beneficiaries overseas with suspended payments.

More From Forbes

Exploring health insurance options abroad: a guide for older americans.

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Patient At a Doctors Appointment

For anyone considering moving overseas—but especially older folks—health insurance is a critical consideration.

If you think that Medicare will cover your health care costs outside of the United States, think again. It only applies under limited circumstances in Canada and Mexico. This fact is so often missed that the government even prints it in U.S. passports.

The good news is that you have many options when it comes to health insurance overseas, and health care systems in other countries can be more affordable and of better quality than the United States’.

They also tend to be easier to understand and navigate compared to the US, where even the experts scratch their heads at the many plans and their respective rules, sources of funding, and enrollment dates.

Here’s an overview of international health insurance options for older Americans looking to move overseas.

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Dana white says former champion just had ‘his last fight’, netflix’s best new show has a perfect 100% critic score, international policies.

International policies provide medical coverage for people living or traveling outside their home country for extended periods (usually one year at a time).

They’re easy to use. You choose a policy with terms and coverage that suit your health needs and lifestyle.

These policies generally cover sickness and accidents, including emergency treatment, inpatient care, cancer treatment, and outpatient surgery.

You’ll pay a premium (monthly or annually) to keep the policy active and select a deductible. The lower the deductible, the higher the premium.

International health insurance policies are annually renewable, and you can keep them for as long as you want.

The benefit of an international health insurance policy is that it can give you portable coverage. You’re covered in your country of residence as well as anywhere else you might travel (including the United States, if you want it).

The downside is that they can be more expensive than the other options on this list, especially as you get older. You can get into most international policies up until age 73.

Local Policies

Local policies are another option for insuring yourself when you move overseas, providing cover exclusively in the country where you’re living. This can be a good option if you plan to spend the majority of your time in that country and not travel internationally much.

You can take out a policy with a state or private health insurance provider, giving you access to local private facilities. In some countries, state health coverage is subsidized or even free.

Many countries have well-developed health systems that are better ranked than the United States in terms of quality, so a local policy can be a great, affordable option.

The downside to this option is that it’s limited in terms of age. If you’re not in the system by a certain age, you can’t access it. In most of the Americas, for instance, the age cap is 60 to 65.

Hospital Policies

In some countries, you can pay a monthly fee at a local hospital or care network to cover whatever health needs may arise.

Fees are usually modest for this type of coverage, which provides access to a hospital and all its facilities. You go there for primary care, specialty care, and hospitalization. Different hospitals have different schemes for deductibles.

This option works well and is cost-effective if you’re spending most of your time in the same place and happy receiving all care within the same network.

If you travel often, this option isn’t going to work for you. Another downside is that if you get too expensive for the hospital, they can cut you off.

Make sure to review the contract and sign-up documents for whatever policy you take on overseas. The rules are different for foreign insurance (whether it’s health, auto, home, or another type of insurance).

Many countries lack an insurance commission to regulate the sale and marketing of policies. You can make one claim and have your policy cancelled, and that can be perfectly legal. It pays to check the fine print that you might have felt safe ignoring in the US.

Travel Policies

If you’re going overseas for a limited amount of time (anywhere from a week to a year), you can take out a travel health insurance policy before you leave to cover any medical needs that arise during your trip.

Travel policies are generally affordable, available for a couple dollars per day. The downside is that they do not cover pre-existing medical conditions.

Health care overseas can be so inexpensive that opting for no health insurance policy and instead paying out of pocket for medical needs can be a reasonable option.

The idea is that you “self-insure,” putting whatever you would have paid for health insurance into a bank account and letting that money grow. This can develop into an extra nest egg for any health insurance or care that you need down the line.

Going naked is not for everybody, especially older folks with pre-existing or serious conditions.

Should You Keep Medicare?

The big question for Americans approaching age 65 who are interested in living overseas is whether to keep Medicare.

Medicare can act as “catastrophic coverage” for expats who live within striking distance of the United States. Then again, it comes with significant costs, since the US has the most expensive health care in the world.

Part A comes with your Social Security, and there’s no premium associated with it, so there’s no reason to turn it down.

Part B comes out of your Social Security, and the Monthly Premium for 2024 is $174.70. You can opt in or out of Part B, but you’ll have to pay a penalty if you don’t sign up when you’re eligible.

My advice is to keep Medicare—Parts A, B, and maybe D (if you’re currently on prescription medication). You can always drop one of these at a later date if you decide that you’re comfortable receiving all of your medical care in your new country of residence.

You could also maintain Medicare and purchase a standalone medical evacuation plan in lieu of taking out an international, local, or hospital policy. This lets you self-insure but also gives you the added protection of being evacuated to the United States to the hospital of your choice.

Other Considerations

Health care and insurance are complicated subjects. Everyone’s health outlook is different, and it’s impossible to predict what the state of their health will be down the line.

You need to consider them early in the process of relocating. You can unwittingly exclude yourself from an option by waiting too long and aging yourself out of it, or by assuming you can buy the policy in another territory.

There’s no one-size-fits-all plan. One or a combination of health insurance options may work best for you, depending on your situation. The best approach is to speak to an industry professional and get a bespoke overview of costs and accessibility.

Regardless of your age, you’ll be able to find an option that suits your needs and receive high-quality medical care overseas.

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Date printed 03 July 2024

The prudent nature of an EPOA

The enduring power of attorney can play a vital role in the running of an SMSF, writes Kathleen Conroy.

An enduring power of attorney (EPOA) is an essential document in the suite of documents that comprise a properly packaged and administered SMSF. With superannuants travelling overseas for work or extended holidays, increased SMSF investment in real property and, sadly, rising instances of dementia in Australia, this is arguably more the case now than ever. This article considers why and, more so, how the EPOA and the SMSF sit together as a legal couple.

Powers of attorney – some basics

Broadly, powers of attorney come in two forms – general and enduring. Both are instruments by which one entity – the principal – appoints one or more other persons – the attorney(s) – to do things the principal would otherwise only be able to do under their own hand, for example, withdrawing money from the principal’s bank account or signing a transfer to sell real property registered in the principal’s name. However, and loosely speaking, an EPOA is a step above a general power of attorney in that, unlike a general power of attorney, an EPOA continues to have effect notwithstanding that a principal has lost capacity. This is an essential distinction in the world of SMSFs.

Both a general power of attorney and an EPOA are simple documents to have prepared. Importantly, however, because the EPOA continues once the principal has lost capacity, there are additional requirements for the witnessing of the execution of that document by the principal. Under the relevant statute in Queensland, for example, execution by the principal must be witnessed by an eligible witness, defined at section 31 of that statute as “a justice, commissioner for declarations, notary public or lawyer”, while the principal may only make the EPOA “if the principal understands [its] nature and effect”.

Each Australian state and territory has its own legislation when it comes to powers of attorney, and a power of attorney must be properly made under the relevant legislation. Other important facts to bear in mind when it comes to the power of attorney include:

• to sell real property under the strength of a power of attorney, that document needs to be registered at the land registry in the state or territory where the property is situated,
• an EPOA can only be revoked by the principal while the principal has capacity with respect to the particular power being revoked,
• the power of attorney comes to an end when the principal dies, and
• legislation sets out a number of matters that can result in a power of attorney being revoked, either in full or in part.

When a principal appoints an attorney under an EPOA, the attorney needs to accept that appointment. The acceptance should be made after the principal signs the appointment document, although the same date is permitted. For appointments made under the Queensland Powers of Attorney Act, case law indicates that neither:

• the passing of time between the principal and the attorney signing the document, nor
• the principal losing capacity between the date that the principal signs the document and the date that the attorney accepts the appointment,
• are fatal to the appointment.

The EPOA and SMSF – step 1

Other than in very limited circumstances, a fund will only qualify as an SMSF where each member of the fund is either a trustee of the fund or a director of the fund’s corporate trustee, and it is because of this threshold requirement for existence as an SMSF that the EPOA becomes a very important document for the SMSF member.

How so? Subsection 17A(3) if the Superannuation Industry (Supervision) (SIS) Act 1993 provides that an SMSF will continue to be an SMSF where, among other things:

• the legal personal representative of a member of the fund is a trustee of the fund or a director of a body corporate that is the trustee of the fund, in place of the member, during any period when:
• the member of the fund is under a legal disability; or
• the legal personal representative has an EPOA in respect of the member of the fund.

The term legal personal representative is defined at subsection 10(1) of the SIS Act as follows: ”…the executor of the will or administrator of the estate of a deceased person, the trustee of the estate of a person under a legal disability or a person who holds an enduring power of attorney granted by a person” (my emphasis).

So, in short, under the superannuation legislation:

• the EPOA is the key to allowing a fund to continue to qualify as an SMSF, notwithstanding that the member may not be acting as trustee of the fund, and
• the enduring power of attorney ‘relief’ can be invoked to assist not only when the member is under a legal disability.

However, as also evident from the above, the fact of the EPOA being drawn up, properly signed and sitting in someone’s drawer is not enough.

The EPOA and the SMSF – step 2

Where the attorney is to act for the principal in the context of an SMSF, subject to my further comments below, the principal must resign as a trustee of the fund (or director of its corporate trustee) and the attorney be appointed in the principal’s place. This is pursuant to sub-paragraph 17A(3)(b) of the SIS Act recited above.

As noted by the Australian Taxation Office (ATO):

• “[t]he appointment of the legal personal representative as a trustee and the removal of the member must be in accordance with the [fund’s] trust deed, the SIS [Act] and any other relevant legislation”; and
• where a corporate trustee is involved, any removal and appointment must also be properly made under any constitution for the corporate trustee and the Corporations Act 2001.

If the SMSF has a corporate trustee and the member does not want to step down as a director of that company, provided that the EPOA has been properly drawn for that purpose, the attorney can be appointed as an alternate director on the board of the trustee company. Where the attorney is an alternate director only, the member can stay on as a director of the fund trustee, although, without limitation, the alternate director will only be able to perform the duties of a director while those duties are not being performed by the member director.

Technical points

Lying underneath the big picture actions that must take place for the appointment of an attorney to office with respect to an SMSF, there are several technical points to consider and, where necessary, address in attorney appointment situations. Without limitation, points to be noted where you are considering the appointment of an attorney as trustee of an SMSF, or a director of its corporate trustee, include the following:

• The appointment of the legal personal representative will only be valid while the underlying instrument for the appointment, that is, the EPOA by which the principal appointed the attorney, is valid.
• The mere fact of the appointment may not be enough in all circumstances to save the fund for the purposes of it qualifying as an SMSF.
• Where any change is made to the officeholders of a company (including a company acting as trustee of an SMSF), the Australian Securities and Investments Commission (ASIC) must be notified of that change on the prescribed form within the requisite time frame. Failure to notify ASIC of the change within the requisite time will result in the imposition of a late lodgement fee.
• By section 118 of the SIS Act, a person will only be eligible to act as the trustee of a fund or a director of its corporate trustee if that person first consents in writing to that appointment.
• A company will have contravened section 201D of the Corporations Act 2001 if it appoints a person as director of the company prior to that person giving the company the person’s signed consent to act as one of its directors.
• Where a person is ineligible to act as either the trustee of an SMSF or a director of its corporate trustee, that person will not be able to assume the office from which the person is barred on the basis that they are the attorney for a fund member under an EPOA.

More generally, the ATO is of the view that one-for-one substitution is not essential when it comes to a member using an EPOA as the basis for the appointment of a person in place of the member as fund trustee or director of the fund’s corporate trustee. Thus, for example, “where one member has granted an enduring power of attorney to more than one person, one or more of those people can be appointed as trustee or director in place of the member”. Importantly, with this example it is necessary to consider the effect of an appointment of attorneys being ‘joint’ or ‘several’.

The downside

When a person is acting as trustee of a fund, or the director of a corporate trustee, that person is not relieved of any of the obligations otherwise applying to people administering the SMSF. The legal personal representative will, that is, bear all the burdens of a fund trustee. Again, in the words of the ATO: “… as the legal personal representative is acting in a personal capacity as a trustee of the SMSF, the legal personal representative is subject to civil and criminal penalties for any breaches of their duties under the SIS [Act] or other legislation. Likewise, a legal personal representative who is a director of the corporate trustee is also subject to civil and criminal penalties for breaches of the SIS [Act] and the Corporations Act”.

In these circumstances, it is vital that a person who is considering stepping forward to act as trustee or director of a corporate trustee for an SMSF in circumstances where the member is unable or unwilling to perform the usual trustee duties, first steps back and properly considers the role about to be undertaken. Without limitation, the volunteer should take advice on the duties and obligations of the office under consideration and whether they have the time, ability and inclination to properly undertake those duties. Similarly, a principal should think long and hard about who the principal appoints as the principal’s attorney(s), where any attorney is to be a candidate for running the principal’s SMSF.

The EPOA has been in use for many years. Without limitation, it allows for a person’s affairs to be properly conducted with minimum fuss where that person is either unable or unwilling to conduct those affairs directly. It is not a legal requirement for SMSF members. If, though, an SMSF member fails to make an EPOA that allows the attorney to be appointed to run the fund in the absence of the member, the member has ignored a tool that could save the fund from disqualification as an SMSF. That could be very expensive, and really is not all that bright.

Kathleen Conroy

Kathleen Conroy is a partner with Gadens Lawyers in Brisbane.

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