As a trustee of an SMSF you are responsible for running the SMSF, making decisions that are in best interests of all fund members and ensuring the SMSF remains compliant with the governing legislation
The Superannuation Industry (Supervision) Act 1993 provides specific obligations that a trustee must comply with, and these are listed below:
· The trustee must remain informed of changes in superannuation and tax laws and ensure the SMSF’s trust deed is compliant with superannuation law and meets the needs of the fund members.
· Sole Purpose Test – the sole and primary purpose of an SMSF must be to provide retirement benefits to the fund members. Breaches of the sole purpose test may include some of the following:
- Illegal early access to benefits held within an SMSF
- Using an SMSF’s assets for personal reasons or current benefit
- Investing SMSF monies into a related business
· Exercise honesty, care, skill and diligence
- Act honestly in all matters concerning the fund
- Exercise skill, care and diligence in managing the fund
- Act in the best interests of all fund members
- To not hinder any other trustee from performing or exercising their functions or powers
- Allow all fund members access to information and documents pertaining to the SMSF
- Keep records of all decisions made in the course of running the SMSF
- Ensure all SMSF assets, including cash balances, are kept separate from personal assets
- Ensure the protection of the SMSF’s assets
· Develop and regularly review an SMSF Investment Strategy – the trustee must develop, implement and regularly review an SMSF Investment Strategy that considers at least the following:
- All fund members’ circumstances
- The risks associated with the SMSF’s investments and the likely returns from said investments with regards to its objectives and expected cash flow requirements
- The composition of the SMSF’s investments with regards to diversification and risks associated with inadequate diversification
- The liquidity of the SMSF’s investments with regards to expected cash flow requirements
- The ability of the entity to discharge its existing and prospective liabilities
- Whether the SMSF should hold a contract of insurance that provides insurance cover for a fund member
· Accept contributions and rollovers –ensure contributions are only accepted and retirement benefits are only paid in accordance with the conditions specified in the superannuation law and the SMSF’s trust deed.
· Comply with strict investment restrictions –as an individual trustee or a director of the corporate trustee of an SMSF you are prohibited from the following:
- Providing direct or indirect financial assistance to any fund member or a relative of a fund member
- Acquiring an SMSF asset, other than business real property, listed securities and certain other limited exempt acquisitions, from a fund member and/or related party of a fund member
- Borrow money on behalf of the SMSF, refer to our article(s) and videos(s) on Borrowing Exceptions and Limited Recourse Borrowing Arrangements to understand permitted borrowing under the superannuation law
- Purchasing investments that are not made and/or maintained on arm’s length terms
- Acquiring an in-house asset(s) that would result in the SMSF’s in-house assets exceeding 5% of total fund assets
· Ensuring all SMSF assets are annually valued at market value
· Ensure the SMSF annually prepares financial statements – including a statement of financial position and an operating statement
· Arrange an annual independent audit –engage an independent auditor who is registered with ASIC
Ensure the SMSF annually prepares an SMSF annual return –ensure the SMSF annual return is prepared and lodged by the deadline and any tax liability is promptly paid.
