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What are my responsibilities as an SMSF trustee?

What are my responsibilities as an SMSF trustee?

A self-managed superannuation fund (SMSF) is a small super fund run by its members and regulated by the Australian Taxation Office (ATO).  It is a fantastic way of gaining a greater degree of day-to-day investment control as part of your retirement savings plan. But in order to run one successfully, you have to understand what your obligations and responsibilities are as a trustee. It’s a lot more complex than simply opening up a savings account and there can be consequences if you get it wrong.

In the following, we’ll attempt to answer some of the most common questions people have regarding their trustee responsibilities. In the process, you will hopefully be better set up to run a successful SMSF or you may realise that running a super fund is best left to the experts. 

What are an SMSF trustee’s obligations regarding their fellow members?

While it’s possible to run a single-member fund, many SMSFs have multiple members. In this case, the decisions you make will affect the fortunes of others.  Not only to you need to make sure that you manage the fund and all its assets separately from your own assets, there are a number of important ethical obligations you as a trustee must keep to. 

As the ATO outlines, you must always act honestly and in good faith with the best interests of your fellow members in mind, and manage the fund with skill and diligence. Conversely, you cannot behave in a way that will prevent other members from performing or exercising their roles and powers. As well as this, you must not allow members to access their funds early. 

What are my legal responsibilities as a trustee?

As well as these ethical obligations, one of the basic principles of SMSFs is that they must be run for the sole purpose of providing death or retirement benefits for the members or the members’ dependents. There are also a number of other legal requirements that a trustee must stick to. The first is the SMSF trust deed, which is the set or rules which governs the functioning of the fund. Along with this, trustees have to comply with the superannuation laws, taxation laws and principles established under trust law. If the trust deed and the law come into conflict, the law will always take precedence. 

What happens if I violate any of these obligations or legal responsibilities?

As a trustee of an SMSF you’re responsible for ensuring compliance with super and tax laws and you don’t have access to some of the legal protection that applies to members of other types of super funds. Perhaps the mildest form of punishment that an SMSF trustee can face for transgressing against these rules are administrative financial penalties – for which you may be personally liable. There are more serious repercussions, however. You can be suspended or even outright removed as a trustee, your SMSF can be declared non-complying and lose its tax concessions and face a hefty tax bill of up to 47% of the value of your fund, and you can even face civil or criminal prosecution. 

Are there any annual obligations I have to keep in mind?

There are a number of annual obligations to do with administering an SMSF that trustees are in charge of. One of the most important of these is the yearly audit, for which the trustee must appoint an independent and approved auditor at least 45 days prior to the due date for the return. The trustee is also responsible for lodging the return by this date. 

In addition, an SMSF trustee is responsible for keeping accurate tax and super records, notifying the ATO if there are any changes in the fund’s details and arranging the valuation of the fund’s assets. 

This is just a brief overview of the various responsibilities and obligations an SMSF trustee is charged with. In order to run a successful SMSF, you’ll want to get a firm and detailed understanding of the role and make sure you have the time and skills to manage the fund. Talking to an expert or doing independent research will definitely help. 

Advice contained in this article is general in nature and not specific to your particular circumstances.  Before making an investment decision you should consider your own financial situation and the relevant Product Disclosure Statement/s.  We also recommend you seek advice about your own particular circumstances from a licensed financial adviser.

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Learn more about superannuation

How do I set up an SMSF?

Setting up an SMSF takes more work than registering with an ordinary superannuation fund. 

An SMSF is a type of trust, so if you want to create an SMSF, you first have to create a trust.

To create a trust, you will need trustees, who must sign a trustee declaration. You will also need identifiable beneficiaries and assets for the fund – although these can be as little as a few dollars.

You will also need to create a trust deed, which is a document that lays out the rules of your SMSF. The trust deed must be prepared by a qualified professional and signed by all trustees.

To qualify as an Australian superannuation fund, the SMSF must meet these three criteria:

  • The fund must be established in Australia – or at least one of its assets must be located in Australia
  • The central management and control of the fund must ordinarily be in Australia
  • The fund must have active members who are Australian residents and who hold at least 50 per cent of the fund’s assets – or it must have no active members

Once your SMSF is established and all trustees have signed a trustee declaration, you have 60 days to apply for an Australian Business Number (ABN).

When completing the ABN application, you should ask for a tax file number for your fund. You should also ask for the fund to be regulated by the Australian Taxation Office – otherwise it won’t receive tax concessions.

Your next step is to open a bank account in your fund’s name. This account must be kept separated from the accounts held by the trustees and any related employers.

Your SMSF will also need an electronic service address, so it can receive contributions.

Finally, you will need to create an investment strategy, which explains how your fund will invest its money, and an exit strategy, which explains how and why it would ever close.

Please note that you can pay an adviser to set up your SMSF. You might also want to take the Self-Managed Superannuation Fund Trustee Education Program, which is a free program that has been created by CPA Australia and Chartered Accountants Australia & New Zealand.

What is an SMSF?

An SMSF is a self-managed superannuation fund. SMSFs have to follow the same rules and restrictions as ordinary superannuation funds.

SMSFs allow Australians to directly invest their superannuation, rather than let ordinary funds manage their money for them.

SMSFs are regulated by the Australian Taxation Office (ATO). They can have up to four members. All members must be trustees (or directors if there is a corporate trustee).

Unlike with ordinary funds, SMSF members are responsible for meeting compliance obligations.

How do I wind up an SMSF?

There are five things you must do if you want to close your SMSF:

  1. Fulfil any obligations listed in the trust deed
  2. Pay out or roll over all the superannuation
  3. Conduct a final audit
  4. Lodge a final annual return
  5. Close the fund’s bank account

How do you open a superannuation account?

Opening a superannuation account is simple. When you start a job, your employer will give you what’s called a ‘superannuation standard choice form’. Here’s what you need to complete the form:

  • The name of your preferred superannuation fund
  • The fund’s address
  • The fund’s Australian business number (ABN)
  • The fund’s superannuation product identification number (SPIN)
  • The fund’s phone number
  • A letter from the fund trustee confirming that the fund is a complying fund; or written evidence from the fund stating it will accept contributions from your new employer; or details about how your employer can make contributions to the fund

You might want to provide your tax file number as well – while it’s not a legal obligation, it will ensure your contributions will be taxed at the (lower) superannuation rate.