Understanding what is involved in being an SMSF trustee is pivotal in deciding if they are right for you. SMSF’s can be a great vehicle to save for your retirement but not understanding the rules and what is expected of you can be very detrimental.
Firstly, it is important to make sure you can be a trustee as some people are prohibited from taking on this role. These include those that have been:
- Convicted of an offence involving dishonesty
- Subject to a civil penalty order under the super laws
- Insolvent or under administration (including an undischarged bankrupt)
- Currently serving a prison sentence
If you are none of the above the next step is to find out more about what you are responsible for when acting as an SMSF trustee.
Sole Purpose Test
As trustee of the SMSF it is your responsibility to ensure your fund meets the sole purpose test AT ALL TIMES. This means your fund needs to be maintained for the sole purpose of providing retirement benefits to your members, or to their dependents if a member dies before retirement.
Separating assets to personal assets
This one is really important too and trips up trustees way too often. Your SMSF is its own entity. That means all the assets of the SMSF must be clearly in the name of the SMSF and all income of those assets is received by the SMSF. Read more about this in our blog here.
Comply with all super and tax laws
You don’t have to be a lawyer to manage your own SMSF but knowing what you can and cannot do is really vital. Start by taking an approved trustee course and checking out some ATO videos. The ATO also have a great webpage dedicated to helping trustees.
Prepare and maintain your investment strategy
Your investment strategy is a document that plans how you will invest in assets to align with your investment goals and objectives. Once you have prepared your investment strategy it is really important that it is reviewed and updated regularly. Find out more in our blog here.
Understand that you will need help
Managing your SMSF will take help from professionals from time to time. Make sure you engage the right people at the right time to assist you in your role as SMSF trustee. See our blogs below for more information:
Other tips to be aware of:
- Keep updated records and notify the ATO of important changes
- Lodge the SMSF’s annual return with the ATO
- Trustee is liable for managing the SMSF
- Illegal to use the SMSF to gain early access to super savings
- Penalties for breaches to the super rules and regulations
- Within 21 days you will be required to complete the ATO trustee declaration
- All investments to be held on an arm’s length basis
- Don’t use the fund to lend to or provide financial assistance to a member or their relatives
- Not more than 5% of the fund’s investments in “in-house” assets (eg assets owned by one of the members)
- Don’t borrow money (except in limited circumstances)
- Acquisition of assets from related parties (except in limited circumstances)
This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.