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Know Your SMSF Trustee Responsibilities

The establishment of SMSF’s has boomed over the last decade, with a huge number of Australians wanting to take over control over their retirement outcomes, or get involved in property investment within their super.

While there are a number of advantages for Self-Managed Super Funds, the responsibility of running your own super has often been under-emphasized.

This is of particular importance as even if you are getting advice from a Financial Adviser and Accountant. Although they may help you in your decision making you still have ultimate responsibility to ensure you meet your duties.

Firstly, the SMSF trustee needs to act in accordance with the following:

  • The SMSF’s own 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

They must also 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 for members. This also needs to be reviewed every year!
  • Separate the SMSF’s assets and your personal assets, so they’re not mixed. Although you run the fund, you have to think of it as a separate entity or person from you.
  • Comply with the superannuation and taxation laws for all contributions received by the fund and benefits paid to members.
  • Keep updated SMSF records for the right amount of time and notify the Australian Taxation Office of any important changes to the fund.
  • Arrange for an independent, ASIC registered approved SMSF auditor to audit the SMSF. This needs to happen annually (at this time, however this may change in future). Your accountant will often organise this for you.
  • Lodge the SMSF’s annual return with the Australian Taxation Office. This is usually performed through your accountant.
  • Be aware of the penalties that may result from breaching superannuation or taxation laws.
  • Follow 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 member cannot sell the SMSF a residential property they own.
    • Don’t borrow money (except in limited circumstances) – A limited recourse borrowing arrangement to purchase a Property via a bare IS ALLOWED, so don’t panic if you have done this.
    • Don’t hold more than 5% of the fund’s investments in “in-house assets”. An in-house asset is a loan to or investment in a related party of the fund or an asset released to a related party. For example, investing in a company controlled by a member of the SMSF would be an in-house asset
    • Don’t enter into investments or selling fund assets on a non-arms length basis; for example, the SMSF should not sell an asset to one of its members at a price below its true market value.

Other things we recommend you do when running your own fund:

  • Get advice from professionals.
    • Although the trustee responsibilities fall on you, professional advice from Accountants and Financial Advisers can ensure you don’t miss anything.
  • Review and upgrade your trust deed regularly.
    • This ensures your fund is up to date with changing regulation and laws.
  • Review your need for an SMSF every few years.
    • This is not encouraging you to wind up your fund, but to just remind yourself why you have it, and ensure it is still appropriate.
      • What are the fees and outflows of your fund?
      • Is your fund helping meet your retirement goals?
      • Do you still need an SMSF to meet your goals?
  • Record every decision you make in for the fund in Meeting Minutes.
    • This ensures there is an accurate story within your fund, which is clear for the ATO to understand.
  • Complete a free Approved education course through registered providers.
    • This is a great way to up-skill and ensure you are across your trustee responsibilities.

As always please get in touch if you have any questions at all about your existing SMSF, or if you are considering establishing one.

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