Key Highlights

•  Chartered Accountants Australia and New Zealand launched a handbook to help accountants recognise and respond to financial abuse.

•  SMSFs can be vulnerable because of concentrated control, enduring powers of attorney, death benefit nominations and related-party transactions.

•  Safeguards include clear governance, reviewing nominations and powers of attorney, and asking the accountant to flag unusual transactions.

Self-managed super funds give members a high degree of control over their retirement savings. That control is one of the structure's main attractions, but it also means the safeguards that exist in large funds, such as independent trustee boards and call-centre fraud checks, are largely absent. When an older member's capacity declines, or when family pressure builds, the people with access to the fund may not always act in the member's interests.

New guidance from Chartered Accountants Australia and New Zealand is aimed at helping accountants recognise and respond to financial abuse. Because accountants and SMSF administrators often see a fund's transactions before anyone else does, the guidance is relevant to trustees and their families as well.

What the guidance covers

CAANZ has launched a handbook titled Identifying and Preventing Financial Abuse for its members. It helps practitioners recognise indicators of financial abuse, apply practical response strategies and escalation pathways, and use tools such as checklists and suggested engagement letter wording to support professional judgment.

The playbook describes financial abuse as part of coercive control, where money is used to harm or trap a person, and identifies older Australians as particularly affected. CAANZ research found that 93 per cent of its members believe chartered accountants have a role in identifying and preventing financial abuse.

CAANZ chief executive Ainslie van Onselen said accountants see sensitive financial information and transactions that others may not, placing them in a unique position to spot warning signs. She said accountants are not investigators but have a responsibility to act in the public interest, ask questions and use professional judgment.

Age Discrimination Commissioner Robert Fitzgerald said trusted advisers often see warning signs first, and that "financial abuse of older people doesn't stop until someone steps in to stop it". He said professionals should not wait for definitive proof before acting, because elder financial abuse often escalates over time.

Why SMSFs can be vulnerable

Several features of the SMSF structure can increase exposure to abuse:

  • Concentrated control. In a two-member fund, the trustees are often a couple or a parent and adult child. If one trustee dominates decisions, the other may sign documents without understanding them.
  • Enduring powers of attorney. Where a member loses capacity, an attorney may step into the trustee role. That person may also be a beneficiary of the member's estate, creating a conflict.
  • Death benefit nominations. Pressure to change or revoke a nomination, or to cash out benefits early, can redirect large sums.
  • Related-party transactions. Loans to relatives, assets bought from family members or payments to related businesses may be dressed up as investments.

Many of these actions would also breach superannuation law. The ATO's guidance on loans and financial assistance says an SMSF cannot lend money to, or provide direct or indirect financial assistance to, a member or a member's relative, and cannot act as guarantor for a loan to one. Where trustees do not comply with the investment restrictions, the ATO says it may impose penalties, make the fund non-complying, disqualify a trustee or prosecute trustees. Abuse inside an SMSF can therefore harm the victim twice: once through the loss of savings and again through the fund's compliance consequences.

Practical safeguards for trustees and families

Trustees can reduce the risk of abuse without undermining legitimate family arrangements:

  • make sure every trustee or director understands and signs fund documents personally, and keeps copies;
  • review death benefit nominations and enduring powers of attorney together, ideally with independent legal advice;
  • consider a corporate trustee with clear rules about how directors are appointed or removed;
  • ask the fund's accountant or administrator to flag unusual transactions, such as large withdrawals or payments to family members; and
  • discuss succession openly while all members have full capacity.

Family members who suspect abuse should seek advice early rather than waiting for certainty, consistent with Fitzgerald's comments.

Hypothetical example

A hypothetical widowed member in her eighties is the sole director of her SMSF's corporate trustee, with her nephew holding an enduring power of attorney. Over several months the nephew arranges lump sum payments into an account he controls, describing them as reimbursements. The fund's accountant notices the pattern when preparing the annual accounts. Under the CAANZ approach, the accountant would ask questions, document concerns and consider the appropriate escalation pathway rather than processing the transactions without comment.

Takeaway

The CAANZ handbook signals that professionals around SMSFs are expected to notice and respond to warning signs of financial abuse. Trustees and families can support that by keeping governance clear, documenting decisions and reviewing powers of attorney, nominations and trustee arrangements before capacity becomes an issue.