The following outlines your obligations as a trustee or director of a corporate trustee of a Self Managed Super Fund (SMSF) and what happens when they are not met.
Understand your obligations
All trustees of your SMSF are responsible for running the fund and making decisions that are in the best financial interests of all members.
This means you are responsible for decisions made by other trustees even if you’re not involved in making the decision.
Trustees must meet specific obligations under the Superannuation Industry (Supervision) Act 1993.
Exercise honesty, care, skill and diligence
As a trustee, you must ensure your SMSF complies with:
The SISA states that as a trustee, you must:
Meet the sole purpose test
The sole purpose of your SMSF is to provide retirement benefits to your members or to pay death benefits if a member dies before retirement.
To be eligible for the tax concessions normally available to super funds, your SMSF must meet the sole purpose test.
Generally, it is illegal for anyone to benefit from the SMSF outside of this sole purpose. It can be illegal to:
An example of breaching (or contravening) the sole purpose test is where your SMSF invests in a rental property specifically to allow a related party to live in that property.
Accept contributions and rollovers
In accordance with the trust deed and superannuation laws, you need to follow specific rules for accepting contributions and rollovers.
You also need to make sure any contributions and rollovers are:
Develop and review your SMSF investment strategy
Your SMSF’s investment strategy must:
When making investments, you must demonstrate with records how your decisions comply with your SMSF investment strategy.
Comply with investment restrictions
There are restrictions on SMSF investments. Any investment your fund makes cannot provide a present day benefit for the members or related parties. Other than very limited circumstances, generally:
Pay benefits
Trustees are responsible for ensuring a member is legally entitled to access their super benefit before releasing any retirement benefits. Generally, members can only access benefits once they meet a condition of release.
You must pay benefits to members according to the trust deed and super laws.
Value SMSF assets
Each year you must value your SMSF’s assets at market value so you can prepare the fund’s accounts, statements and the SMSF annual return (SAR). Some assets must be valued and reported in a specific way. You must also keep evidence of your valuations to provide to your SMSF auditor.
Prepare SMSF financial statements
Each year you need to prepare:
You must then provide this to your SMSF auditor.
Arrange the yearly audit
Your SMSF must be audited each year by an independent SMSF auditor who is registered with the Australian Securities & Investments Commission (ASIC). The auditor will assess your fund’s compliance with super laws and report any contraventions to us.
Lodge the SMSF annual return (SAR)
Each year you must lodge the SAR by its due date and pay any tax liability. If the SAR is more than 2 weeks overdue, you may not be able to receive contributions or rollovers until you lodge your return.
You may also be required to lodge:
Pay yearly fees
Your SMSF is required to pay the supervisory levy when you lodge your SAR. The amount will depend on whether your fund is new, existing or winding up.
If your SMSF is set up with a corporate trustee, you will also have to pay ASIC fees.
Notify the ATO of changes to your SMSF
You must tell the ATO about certain changes to your SMSF within 28 days.
If your SMSF is set up with a corporate trustee, you’re also required to inform ASIC.
Keep accurate records
You must keep records of all decisions and actions your SMSF takes. This will provide you with supporting evidence on the decisions you and the other trustees make.
Meet the residency rules
Your SMSF must be an Australian super fund at all times during the financial year. If it isn’t, the assets and income of the fund will be taxed at the highest marginal rate.
Your fund is an Australian super fund if it meets all three of these residency conditions at all times during the financial year:
If a member moves or travels overseas for an extended period, this may affect the residency status of the fund.
Consequences of not meeting your obligations
The ATO is a key regulator for SMSFs. This means they’re responsible for:
Their main focus is to assist trustees to understand their obligations and comply with the law.
When an obligation is not met and results in a contravention, they may need to take compliance action. The action they take will depend on the:
Source: Australian Taxation Office