The Australian Securities and Investments Commission ("ASIC") permits a company to be nominated as a Special Purpose Superannuation Company, provided it satisfies a number of criteria. The sole purpose of the company must be to act as a trustee of a regulated superannuation fund within the meaning of section 19 of the Superannuation Industry (Supervision) Act 1993 ("SIS"). The company's constitution must have a clause prohibiting the company from distributing income or property to its members. In fact, ASIC asks for a declaration that states this is the case.
Section 19(4) of SIS states that, to be a regulated superannuation fund, the fund must give a notice of election "to APRA, or such other body or person as is specified in the regulations". Regulation 1.04A says: “For subsection 19(4) of the Act, the Commissioner of Taxation is specified". Accordingly, APRA regulated funds give the notice of election to APRA, while SMSFs give the notice of election to the ATO.
Some practitioners believe that, as a special purpose company, the constitution of the company cannot refer to distribution rights. This is not correct. As mentioned earlier, the constitution must have a clause prohibiting the company from distributing income or property to its members. This only applies, however, if the company acts only as a superannuation trustee, and doesn't require the absence of distribution provisions.
For example, if the company acted as the trustee of a regulated super fund AND traded in its own right, it could quite rightly make distributions but could not then claim to be "special purpose".
In any event, the vital thing to remember is that the only reason to claim "special purpose" status is to obtain a reduction in the annual fees paid to ASIC. Nothing else turns on this point or on the company's status.
So, if your client's SMSF has a corporate trustee, you can only claim the reduced ASIC fee if notice under section 19 of SIS has been given, and if the constitution prohibits distributions while the sole activity of the company is that of SMSF trustee.
The standard Acis constitution can be used for a special purpose SMSF company or a trading company, or for a company that does both. We have deliberately built this inherent flexibility into our standard constitution to avoid the need for changes if the company's purpose changes. We've kept it simple to ensure you're covered without the need to establish more complex structures.
Get in touch with our team should you have any questions or wish to review your constitutions.