Let’s take a look at 5 key duties and responsibilities that trustees must understand.
Every trustee or corporate trustee director must understand these duties and responsibilities.
1. The Sole Purpose of the Fund
It is your responsibility to ensure the fund is run for the sole purpose of providing super to its members when they retire (or to their dependents if a member dies before they retire). You must make sure that the SMSF is run appropriately and to the best of your ability. This includes:
Protecting super assets in the fund,
Making decisions in the interest of all members,
Making sure all actions take are allowed under super laws, and
Implementing and regularly reviewing the fund’s investment strategy.
There is a test that judges whether your SMSF meets the requirement of having the sole purpose of providing super to its members when they retire.
Here are a few reasons that would result in your breach of the sole purpose test:
You, any trustee of your fund, or related party of a trustee, directly or indirectly, obtains a financial benefit when making investment decisions and arrangements (other than increasing the return to your fund),
You or any other trustee or related party are using or have access to the assets when investing in collectables, such as art, jewellery or wine, or
Your fund provides a pre-retirement benefit to someone, e.g. personal use of a fund asset; living in a property that the fund owns.
2. Creating and Reviewing Investment Strategy
The superannuation laws require that you must prepare and implement an investment strategy for your SMSF which you must then give effect to and review regularly. You are not required to change your investment strategy every time you review it, but you need to record that you have reviewed your strategy and file this information. Your auditor will want to see it later.
There are restrictions on what investments can be made by your SMSF. You are responsible for making sure that your fund’s investments adhere to these restrictions. If you don't comply with investment restrictions, the ATO can fine you with hefty penalties and you could be disqualified as a trustee, and even prosecuted.
3. Accepting contributions and paying benefits
You must know the rules on when your SMSF can receive contributions and when it can pay benefits to members. You are responsible for making sure all contributions and payments comply with laws and are allowed under the trust deed.
There are minimum standards for accepting contributions into your self-managed super fund (SMSF), and the trust deed of your own fund may have more rules. Whether a contribution is allowable depends on:
whether you have the member's tax file number (TFN) – if not, you can't accept member contributions
the type of contribution – for example, you can accept mandated employer contributions, such as super guarantee contributions from a member’s employer, at any time regardless of their age or the number of hours they’re working
the age of the member – for example, you generally can't accept non-mandated contributions for members 75 years old or older
whether the contribution exceeds the member's fund-capped contributions limit – if the contribution was received prior to 1 July 2017.
4. Administrative duties
You have administrative duties to perform, including:
Keeping records for required timeframes,
Appointing an SMSF auditor each year,
Lodging the SMSF annual return by the due date, and
Notifying the ATO of changes to the SMSF
You need to make certain records available to your fund’s SMSF auditor when they audit your fund each year. You may also need to provide accurate records to the ATO if they ask to see them.
You need to keep the following records for a minimum of five years:
accurate and accessible accounting records that explain the transactions and financial position of your SMSF
an annual operating statement and an annual statement of your SMSF’s financial position
copies of all SMSF annual returns lodged
copies of Transfer balance account reports lodged
copies of any other statements you are required to lodge with us or provide to other super funds.
You need to keep the following records for a minimum of 10 years:
minutes of trustee meetings and decisions (if matters affecting your fund were discussed, for example you reviewed the fund's investment strategy)
records of all changes of trustees
trustee declarations recognising the obligations and responsibilities for any trustee, or director of a corporate trustee, appointed after 30 June 2007
members’ written consent to be appointed as trustees
copies of all reports given to members
documented decisions about storage of collectables and personal use assets.
5. Appointing New Trustees
You must ensure that members are eligible to be trustees or directors. Nearly anyone 18 years old or over can be a trustee or director of a super fund. This is as long as they're not under a legal disability (such as mental incapacity) or a disqualified person.
You must answer no to all of these questions (otherwise you are a disqualified person):
Have you ever been convicted of a dishonest offence, in any state, territory or a foreign country?
Have you ever been issued with a civil penalty order?
Are you currently bankrupt or insolvent under administration?
Have you been previously disqualified by the ATO or APRA?
The fund must ensure that every trustee or corporate trustee director completes a trustee declaration within 21 days of starting. As a trustee or corporate trustee director, you must:
act honestly in all matters concerning the fund
act in the best interests of all fund members when you make decisions
manage the fund separately from your own superannuation affairs
know, understand and meet your responsibilities and obligations
ensure that the SMSF complies with the laws that apply to it.
If the ATO feels that you don’t understand any of these responsibilities, the ATO can direct you to undertake an education course.
Remember, even if you have an administrator or other SMSF professional managing your fund – you are still the trustee and the trustee duties and responsibilities remain with you.
As both a tax accountant and financial adviser, Verve Group is in a unique position to help you on the path to a secure retirement. As accountants, we can help you with establishment and ongoing administration and compliance. Our financial advisers can help you to craft an investment strategy and provide financial advice. Learn more about the roles of accountants versus financial planners here.
Contact Verve Group on (08) 8120 4877 or book an appointment online.
General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives.