He said members in an SMSF have portability rights to leave on their own terms, but they don’t have rights to “give the boot” to a member due to a conflict or difference of opinion because there are very strict and set rules in the superannuation regulations.

“For example, Reg 6.28 provides that you cannot be rolled out unless the member in question has given their written consent,” he said.

“There are other bits and pieces in the SIS regulations where consent is also part of this of overall framework.”

Mr Fettes said additionally, Reg 4.12 relates to the receiving fund which also has to be understanding that written consent has been provided and if they have reasonable grounds to believe that the written consent has not been provided, they’re not able to accept the rollover.

“An interesting corresponding part of the consent equation is the receiving fund being under that obligation as well,” he said.

“So where you’re progressing a contentious or adversarial exit process, it can be difficult and they’re very seldom straightforward.”

In relation to a family split, the law does have some process in place to manage an exit from a vehicle such as an SMSF and although it is not perfect, it does provide some certainty and outcome.

“If you are dealing with a relationship breakdown between siblings or other persons, for example, who are not in a spousal relationship, then the options are not there,” he warned.

“It might be that it’s a matter that needs to go to a Supreme Court to get a resolution as part of the trust law concepts or superannuation law compliance concepts.

“But courts aren’t always going to be wanting to intervene in relation to the private matters of the SMSF, particularly where there aren’t necessarily substantive breaches of trustee or directors’ duties.

“It may be that the court is going to just refer the parties to some sort of mediation and so you’re not necessarily going to get the kind of outcome at least immediately, without going through quite a bit of negotiated dispute resolution to try and reach a settlement.”

Mr Fettes said a negotiated outcome is often the only way a member is going to be leaving an SMSF in an adversarial context.

“It’s generally not possible to kick out an uncooperative member against their wishes and absent of their written consent being provided,” he said.

However, he said there are ways in which to try and mitigate the situation with the right documentation.

“It’s the private trust rules that matter for the SMSF deed and for a corporate trustee, the company constitution is going to be relevant,” he said.

“You have to look at what can be put in place for decision-making, and potentially dispute resolution.

“Things such as what are the appointor powers to change the trustee? Is there any delegated authority or, for example, the trustee to make a decision on behalf of the member?.

“If the trustee as a majority decision has taken a view, is there any ability for the trustee to act on behalf of the member on that basis? Or to overcome perhaps a reticent member who may not be wanting to cooperate?

“A very vanilla or not necessarily well-drafted and considered deed isn’t going to provide much assistance.”

Join us at the SMSF Adviser Technical Strategy Day as our speakers unpack the latest legislation and regulation impacting SMSFs, the proper process for paying death benefits in order to avoid a challenge, and how to navigate the new era of SMSF document management.

The SMSF Adviser Technical Strategy Day 2023 will take place in the following locations:

• Tuesday 17 October at the Four Seasons Hotel, Sydney
• Wednesday 18 October at the Rydges Southbank, Brisbane
• Wednesday 25 October at Grand Hyatt, Melbourne

Click here to buy your tickets and don’t miss out!

For more information, including agenda and speakers, click here.