Welcome to the latest issue of the KHQ Super Alert. This week, the Supreme Court of Victoria handed down two decisions relating to trustee remuneration. Also, ASIC launched its new Financial Advice Hub and the Federal Government’s Productivity Commission released its research paper on wealth transfers.
Supreme Court of Victoria – Trustee remuneration
On 7 December 2021, the Supreme Court of Victoria handed down its decision in Re HEST Australia Ltd [2021] VSC 809. The Court determined that the trustee was ‘justified in exercising its [amendment] powers’ under the relevant fund deed to insert clauses which would authorise the trustee to determine a fee to be payable to it. This would allow the trustee to ‘accumulate capital in its personal capacity’.
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Productivity Commission – Research paper on wealth transfers released
On 7 December 2021, the Productivity Commission released its research paper titled ‘Wealth Transfers and their Economic Effects’ (Paper). According to the Paper’s accompanying media release, the Paper ‘seeks to fill a gap in the research literature’ by providing information about:
- ‘how much wealth Australians transfer while they are alive (gifts) and after they die (inheritances)’;
- ‘how wealth transfers affect those who receive them’; and
- ‘the impact of wealth transfers on the distribution of wealth in society now, and in the future’.
The Paper found that ‘wealth transfers are reducing some measures of relative wealth inequality in Australia’. Commissioner Catherine de Fontenay notes that ‘[wealthier] people receive more inheritances and gifts on a dollar-for-dollar basis but less as a percentage of their existing wealth’.
Click here for details.
ASIC – New financial advice webpage
On 7 December 2021, ASIC launched its Financial Advice Hub (Hub) for advice licensees and advisers. The Hub ‘is a one-stop access point for pertinent guidance and information impacting financial advice licensees, advisers, and relevant stakeholders’. According to ASIC, the Hub was developed in response to the ‘unprecedented 466 submissions’ received as part of Consultation Paper 332: Promoting access to affordable advice for consumers (discussed in our Super Alert of 20 November 2020). As a part of that consultation, industry participants:
- noted ‘that ASIC’s guidance was hard to find’; and
- requested ‘shorter, simpler, and more user-friendly guidance with practical examples’.
The Hub ‘is just one in a range of initiatives that ASIC has scheduled for release in response to calls to better assist advice licensees and advisers in their efforts to provide good-quality and affordable personal advice to consumers’. ASIC intends to ‘continue to engage with industry on initiatives to assist them with providing good quality and affordable advice to consumers’.
Click here for details.
Supreme Court of Victoria – Trustee remuneration
On 6 December 2021, the Supreme Court of Victoria handed down its decision in Re Care Super Pty Ltd [2021] VSC 805.
The trustee sought judicial advice from the Supreme Court of Victoria on a number of matters, including in relation to trustee remuneration. The fund’s trust deed already contained a remuneration clause, and the trustee had already made a fee determination (subject to the judicial advice) to charge a fee so as to build a ‘Trustee Resilience Reserve’ to be held by the trustee on its own behalf.
Ultimately, the Court declined to provide the judicial advice sought because of a ‘disconformity between the judicial advice sought and the evidence concerning the way in which the fee determination was reached as evidenced by the Board resolution and the associated Board papers’.
Nevertheless, the Court made some findings which may be helpful to trustees grappling with these issues:
- ‘[T]he power to charge fees to build up a reserve which could be drawn on in the event that a trustee becomes exposed to a non-indemnified statutory liability … is not inconsistent with the SIS amendments [to sections 56 and 57]’.
- ‘[T]he charging of fees to build up a reserve is conceptually distinct from a provision that would have the effect of exempting or indemnifying a trustee against such liabilities’.
- ‘When the trust deed contains a remuneration clause, a trustee is entitled to charge such a fee subject to the conditions in the relevant clause and the other obligations imposed on the trustee in relation to the fee to be charged. Once such a fee ceases to be a trust asset, the property is property of the trustee in its own right to do with as the trustee sees fit.’
Click here for details.
