SMSF trustees are ultimately responsible for the operation of their SMSF. There are a number of duties, responsibilities and obligations required of an SMSF trustee.
The SMSF trustee needs to act in accordance with the following:
- The SMSF trust deed
- The Superannuation Industry (Supervision) Act 1993
- The Superannuation Industry (Supervision) Regulations 1994
- The Income Tax Assessment Act 1997
- The Tax Administration Act 1953
- The Corporations Act 2001
- Other general rules such as those imposed under other tax and trust laws
Trustees must meet the following requirements when running an SMSF:
- Make sure that the sole purpose of the SMSF is to set you up for retirement or to provide death benefits.
- Create an investment strategy which considers all of the SMSF’s circumstances including investment risk, likely investment returns, liquidity and cash flow requirements, diversification of investments and insurance needs of members.
- Separate the SMSF’s assets and your personal or business assets, so they’re not mixed.
- Comply with the superannuation and taxation laws for all contributions received by the fund and benefits paid to members.
- Keep updated SMSF records (i.e. minutes of trustee meetings and decisions, financial statements, SMSF annual return) for the right amount of time and notify the Australian Taxation Office (ATO) of any important changes to the fund.
- Arrange for an independent, ASIC registered approved SMSF auditor to audit the SMSF every year.
- Lodge the SMSF’s annual return with the ATO.
- Be aware of the penalties that may result from breaching superannuation or taxation laws.
SMSF Trustee Duties
Trustee duties also include following the superannuation investment guidelines, so your SMSF investments don’t break any rules including:
- Don’t use the fund to lend to or provide financial assistance to members or relatives, for example, paying a relative’s school fees from the SMSF’s assets.
- Don’t purchase assets from fund members or related parties (except in special circumstances), for example, an SMSF cannot acquire residential property, owned personally by the member.
- Don’t borrow money (except in limited circumstances).
- Don’t lend to, invest in or lease SMSF assets to a related party (including related companies and trusts) valued at more than 5% of the market value of the fund’s total assets. These investments are called “in-house assets” (limited exceptions apply). For example, investing in a company controlled by a member of the SMSF would be an in-house asset.
- Don’t enter into investments, buy or sell fund assets on a non-arm’s length basis; for example, the SMSF must conduct all transactions on a commercial basis and should not sell an asset to one of its members at a price below its true market value.
Before setting up an SMSF, it is vital that you are aware of and understand your SMSF trustee obligations. Setting up and managing an SMSF without taking into account your trustee obligations could put your SMSF at risk.
To keep you informed and ensure you are compliant with your SMSF trustee obligations, duties and responsibilities, we advise speaking with an SMSF specialist before making any big decisions.