Corporate Trustee of SMSF being deregistered: Consequences & Remedies

News | Mehak Gaba | Released: 05/02/2025 | Read: 5 Mins

When managing a Self-Managed Superannuation Fund (SMSF), it’s important to have a clear understanding of the relationship between the SMSF and its trustee company. Challenges can arise, if the trustee company’s compliance is not maintained, whether due to unpaid annual review fees, overdue penalties, or other compliance failures.  If the company is deregistered as a result, it ceases to exist as a legal entity.

This raises key questions: How does this impact the validity of the SMSF, and what steps should be taken to ensure the fund remains fully compliant?

How Deregistration of Trustee Company impacts your SMSF?

When a trustee company is deregistered, it may have significant consequences for your SMSF. Here are the key points to consider:

• Loss of Control of SMSF Assets: Under Section 601AD(1) of the Corporations Act 2001 (Cth), the company ceases to exist and all property held by a de-registered company on behalf of the SMSF will automatically vests in the name of Commonwealth of Australia, represented by ASIC.

• Breaching Trustee Requirements: Section 66 of the SISA mandates that an SMSF trustee must be a valid entity. If the trustee company is deregistered, the SMSF no longer meets this requirement and may be deemed "Non-compliant" by the ATO.

• Unclaimed Monies: Any money held in the fund’s bank account(s) may be lodged with ASIC’s Unclaimed Monies Account.

• Inability to Accept Contributions or Rollovers: The SMSF will no longer be able to accept employer contributions or superannuation rollovers. This can result in the suspension of any future contributions to the SMSF until a new trustee is appointed and the fund is brought back into compliance.

• Tax Implications and Penalties: A non-compliant SMSF can trigger substantial tax implications, including the loss of concessional tax treatment and instead be taxed at the highest marginal rate.

Does Deregistration mean your SMSF will fail?

Key Facts of the Case

• Ilze Marija Baltins, was the sole member of the Baltins Superannuation Fund (SMSF), passed away in June 2015.
• Following her death, the trustee company, I Baltins Pty Limited, became inactive and was deregistered.
• This left the fund in a state of legal uncertainty, with valuable assets including $1.2 million in bank deposits and shares under the control of a deregistered company.
• After letters of administration were granted in 2017, the administrator of the estate sought to resolve the issue by managing the Fund's property.
• The administrator asked the court for two things:
  • To appoint new trustees for the fund, including himself and the CEO of the Victor Chang Cardiac Research Institute Ltd, which was the beneficiary of the estate; or 
  • He requested that ASIC (the regulator) reinstate the company and allow him to become the company's sole director and secretary.

The court decided that, given the complexity of the situation, it was appropriate to appoint new trustees for the fund rather than reinstate the company. The court also ordered that the property of the Fund vest in the new trustees.

This case emphasizes the importance of maintaining a company’s registration and ensuring there is a succession plan in place, especially for SMSFs with a sole member or trustee.

Key Learning & Consideration From Baltins Case

The Baltins case provides several key lessons for managing your SMSF effectively:

• Maintain Trustee Company Registration: Ensure that your trustee company's registration is kept up to date with ASIC to avoid the risk of deregistration.
• Clear Powers for Trustee Appointments in your SMSF Trust deed: Your SMSF’s governing rules should clearly outline how to handle trustee appointments, especially in the event of death or incapacity.

 This provision has been made in the SMSF Deed of Trustdeed.com.au

As specified in Clause 32 of our SMSF deed, if the trust ceases to have a trustee whether due to deregistration of a corporate trustee or disqualification of an individual trustee the member(s) can unanimously appoint a new trustee by deed and this appointment can have retrospective or prospective effect, when the trust ceased to have a trustee. This ensures continuous compliance with the fund’s operations.

• Appoint a New Trustee : According to Section 52 of the SISA, the trust deed must be updated to reflect the new trustee to ensure the fund remains compliant with its legal obligations. When appointing a new trustee, ensure to Update the trust deed*. 

You may appoint either an individual or a corporate trustee. If selecting a new corporate trustee, register a Special Purpose Company and further transfer from one corporate trustee to another Corporate Trustee. You can transfer from Corporate Trustee to an Individual Trustee structure as well. However, it is essential to ensure that the individual trustee structure has minimum 2 individual Trustees in the SMSF.  One Trustee must be the Member and the other Trustee must be a person who is either: Related to the Member; or Not an employer of the Member.

• Transfer Assets to the New Trustee: All assets of the SMSF must be transferred from the deregistered trustee to the new trustee. As per Section 66 of the SISA, the trustee has a fiduciary duty to ensure all assets are held correctly for the benefit of the members.

• Review Fund Compliance: After appointing the new trustee and transferring assets, conduct a thorough review of the SMSF’s compliance status. Regular compliance checks are a requirement under Section 35B of the SISA to ensure the fund is operating within the regulations
• Succession Plan for Sole Member SMSFs: For SMSFs with a sole member, having a clear succession plan in place is crucial. In the event of the member’s death, the legal personal representative should be able to step in and manage the fund's affairs seamlessly.

Can You Reinstate a Deregistered Trustee Company?

You can reinstate a deregistered trustee company as well, if you do not want to appoint a new Trustee.

Section 601AH(1) of the Corporations Act 2001 (Cth) provides a pathway for reinstatement under certain conditions, the process is not straightforward. Specific criteria must be met, and detailed explanations must be provided to ASIC.

To initiate the process, a company must lodge Form 581 with ASIC. The company may be reinstated within 56 business days, if ASIC approves your request. Once reinstated, ASIC will issue a Certificate of Reinstatement, which restores the company's legal status and allows it to resume its role as the trustee of the SMSF.

Consult with Experts

Register a Special Purpose Company of SMSF on Trustdeed

1. Login to your Trustdeed account on www.trustdeed.com.au or Click here to Register now.
2. Go to your Document Manager and select Document Category.
3. Select Company registration ($725- including GST).
4. Fill out the application form and you will receive the following documents instantly: 

• • Certificate of Incorporation.
  • Constitution.
  • Minutes and Consent. 
  • Instruction sheet - explaining the statutory procedure to be followed.
  • Form 201.

Change Trustee structure with Trustdeed.com.au

Visit www.trustdeed.com.au for more details or call us on (02) 9684 4199

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