What Are Your Responsibilities As a Self-Managed Super Trustee?
The decision to become a trustee of a self managed super fund (SMSF) should not be taken lightly.
As a trustee, the responsibility of running the fund and complying with the law rests solely with you.
As a trustee of a SMSF, you must act in accordance with the fund's trust deed and superannuation laws.
SIS Act Requirements The SIS Act is a guideline for what is required of a trustee.
It sets down the duties and responsibilities of a trustee.
As a trustee, you are legally obliged to:
Comply with the sole purpose test The sole purpose test means that a SMSF must operate only to provide benefits to members upon their retirement, or to their dependents if a member dies before retirement.
This is based on the idea that superannuation benefits provide for a person's retirement.
Therefore, any investment decision must be made for future rather than present benefit.
Have an investment strategy and invest responsibly Trustees are required to develop and implement an investment strategy for their fund, and regularly review the strategy.
Why? Because an investment strategy guarantees that investments are made to best achieve the fund's objectives and to ensure that the fund is not exposed to undue risk.
When preparing your investment strategy, you need to consider the following:
If in doubt, seek financial advice.
Keep proper records Under super and tax laws you are required to keep accurate records.
You must keep accounting records that show the fund's transactions and financial position for five years.
Records of changes of trustees, members' written consent, and all lodged returns must be kept for ten years.
These records should help you meet your tax and audit obligations and will assist in the efficient operation of your fund.
Keep fund assets separate All fund money and assets must be kept separate from personal or business money and assets.
Fund money must not, under any circumstances be used for personal or business purposes.
The fund investments are made only to provide for members in retirement.
Do not lend superannuation money to members or relatives A fund's assets must not be used to provide financial assistance to a member, or a member's relative.
You are prohibited from providing a loan to a member, or a member's relative.
Do not borrow money A SMSF is not allowed borrowing money.
This is to ensure that there is money available to pay out member benefits at retirement.
Buying assets from a related party As a trustee, you are not permitted to acquire assets from a related party of the fund.
There are exceptions to this rule.
Therefore, you are permitted to purchase assets from a related party where:
You can acquire an in-house asset provided it is less than 5% of the fund's total assets.
Remember, that loans are prohibited if the related party is a member or a relative of a member.
Buy and sell assets at true market value The purchase price of fund assets should always reflect a true market value for the asset.
Income from assets should always reflect a true market rate of return.
This ensures that no money is withdrawn from the fund prematurely.
For example, a trustee acquires an asset from a related party.
Say they pay more for the asset than the market value.
In effect, this transaction has allowed money to be withdrawn from the fund earlier than allowed.
Make sure contributions are allowable It is important to note that contributions must be made for retirement purposes only and not to avoid paying tax.
Eligibility of trustees A disqualified person cannot act as a trustee of a SMSF fund.
A person is held to be under a legal disability where they have been convicted of a criminal offence, are bankrupt or under the age of 18.
A company cannot act as trustee if action has commenced to wind up the company.
Do not withdraw money early You must not take money out of the fund early as it is meant for retirement.
Using a SMSF to gain early access to superannuation benefits is illegal.
Penalties will apply to the fund and the member receiving the benefits.
The fund faces the risk of being made uncomplying.
This would mean that the fund would be taxed at the highest marginal tax rate.
Lodgement and payment obligations All SMSFs must lodge a Fund income tax and regulatory return (NAT 0658) with the ATO each year.
Before lodging the return, the financial accounts and statements of the fund must be audited by an approved auditor.
Complete and lodge an activity statement for GST A fund must register for GST if its annual turnover is more than $75 000.
It will also be required to lodge a Business activity statement (BAS) at the end of each reporting period.
The majority of funds will not reach this threshold and will not be required to lodge a BAS.
Get professional advice It is not recommended that you go it alone.
Seek professional advice from qualified accountants and financial advisers to ensure you stay on top of legislative changes and your self managed super fund.
As a trustee, the responsibility of running the fund and complying with the law rests solely with you.
As a trustee of a SMSF, you must act in accordance with the fund's trust deed and superannuation laws.
SIS Act Requirements The SIS Act is a guideline for what is required of a trustee.
It sets down the duties and responsibilities of a trustee.
As a trustee, you are legally obliged to:
- act honestly in all matters concerning the fund
- act in the best interests of all the fund members
- keep the fund money and asset separate from any other personal or business money and assets
- develop and implement an investment strategy
Comply with the sole purpose test The sole purpose test means that a SMSF must operate only to provide benefits to members upon their retirement, or to their dependents if a member dies before retirement.
This is based on the idea that superannuation benefits provide for a person's retirement.
Therefore, any investment decision must be made for future rather than present benefit.
Have an investment strategy and invest responsibly Trustees are required to develop and implement an investment strategy for their fund, and regularly review the strategy.
Why? Because an investment strategy guarantees that investments are made to best achieve the fund's objectives and to ensure that the fund is not exposed to undue risk.
When preparing your investment strategy, you need to consider the following:
- investing in a range of assets
- the risk and likely return from investments
- how easily the fund's assets can be converted to cash to meet fund expenses
- the fund's ability to pay benefits when members retire
If in doubt, seek financial advice.
Keep proper records Under super and tax laws you are required to keep accurate records.
You must keep accounting records that show the fund's transactions and financial position for five years.
Records of changes of trustees, members' written consent, and all lodged returns must be kept for ten years.
These records should help you meet your tax and audit obligations and will assist in the efficient operation of your fund.
Keep fund assets separate All fund money and assets must be kept separate from personal or business money and assets.
Fund money must not, under any circumstances be used for personal or business purposes.
The fund investments are made only to provide for members in retirement.
Do not lend superannuation money to members or relatives A fund's assets must not be used to provide financial assistance to a member, or a member's relative.
You are prohibited from providing a loan to a member, or a member's relative.
Do not borrow money A SMSF is not allowed borrowing money.
This is to ensure that there is money available to pay out member benefits at retirement.
Buying assets from a related party As a trustee, you are not permitted to acquire assets from a related party of the fund.
There are exceptions to this rule.
Therefore, you are permitted to purchase assets from a related party where:
- the asset is acquired at market value and is either a listed security (e.
g.
shares) or is property used for business - the asset is an in-house asset that is less than 5% of the fund's total assets.
- a loan to a related party;
- an investment in a related party; or
- a lease of a fund asset to a related party
You can acquire an in-house asset provided it is less than 5% of the fund's total assets.
Remember, that loans are prohibited if the related party is a member or a relative of a member.
Buy and sell assets at true market value The purchase price of fund assets should always reflect a true market value for the asset.
Income from assets should always reflect a true market rate of return.
This ensures that no money is withdrawn from the fund prematurely.
For example, a trustee acquires an asset from a related party.
Say they pay more for the asset than the market value.
In effect, this transaction has allowed money to be withdrawn from the fund earlier than allowed.
Make sure contributions are allowable It is important to note that contributions must be made for retirement purposes only and not to avoid paying tax.
Eligibility of trustees A disqualified person cannot act as a trustee of a SMSF fund.
A person is held to be under a legal disability where they have been convicted of a criminal offence, are bankrupt or under the age of 18.
A company cannot act as trustee if action has commenced to wind up the company.
Do not withdraw money early You must not take money out of the fund early as it is meant for retirement.
Using a SMSF to gain early access to superannuation benefits is illegal.
Penalties will apply to the fund and the member receiving the benefits.
The fund faces the risk of being made uncomplying.
This would mean that the fund would be taxed at the highest marginal tax rate.
Lodgement and payment obligations All SMSFs must lodge a Fund income tax and regulatory return (NAT 0658) with the ATO each year.
Before lodging the return, the financial accounts and statements of the fund must be audited by an approved auditor.
Complete and lodge an activity statement for GST A fund must register for GST if its annual turnover is more than $75 000.
It will also be required to lodge a Business activity statement (BAS) at the end of each reporting period.
The majority of funds will not reach this threshold and will not be required to lodge a BAS.
Get professional advice It is not recommended that you go it alone.
Seek professional advice from qualified accountants and financial advisers to ensure you stay on top of legislative changes and your self managed super fund.
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