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A Self Managed Superannuation Fund (SMSF) is a superannuation fund with up to six members. SMSFs are generally established by family members wishing to consolidate their family’s superannuation savings.
The members cannot be employees of other members, unless they are relatives. Each member of the fund must take on the trustee role.
An SMSF is still governed by superannuation laws in the Superannuation Supervision Industry (SIS) Act and taxation legislation that relates to superannuation. These funds are regulated by the Australian Taxation Office (ATO).
An SMSF can either have individuals who act as the trustee or a corporate trustee. Strict rules apply as to who can be a trustee or director of a corporate trustee and each person must not be a disqualified person.
If members choose to have individual trustees, each member must act as trustee. No-one can be a trustee without also being a member unless the fund only has one member. In this case, a second person needs to be nominated as trustee.
Where an SMSF has a corporate trustee, each member must be a director of that company, and each director must be a member. If the fund only has one member, that person can be the sole director or a second director may be appointed. If using a corporate trustee, it is generally best to use a company that has no other purpose.
A person cannot act as trustee (or director of a corporate trustee) if they are a disqualified person. This means they also cannot be a member of an SMSF. A disqualified person is someone who:
A company cannot act as trustee if a responsible officer is a disqualified person or the company is in liquidation.
In certain situations, a person can be a member of an SMSF but may be unable to fulfil the role of trustee. In these cases, it may be possible for another person to act in their place as either the member’s legal personal representative or under an Enduring Power of Attorney (EPoA). These situations include:
Legal advice should be sought in these situations to ensure the SIS rules are not breached and to ensure the correct process to appoint the replacement trustee is followed.
Trustees must accept the role in writing and verify that they are not a disqualified person.
All new trustees and directors of trustee companies are also required to complete a ‘trustee declaration’ within 21 days of being appointed a trustee. This form is available from the ATO. It does not have to be sent back to the ATO but must be retained for at least 10 years and be made available to the regulator if requested.
The trustees are required to formulate, regularly review and give effect to an investment strategy. The investment strategy is a document that outlines the key investment guidelines to be adopted by trustees when investing the SMSFs funds.
When preparing an investment strategy, consideration must be given to the following:
This strategy should be documented in writing and be reviewed regularly (at least annually). Investments that do not fit within the strategy cannot be held.
The ATO has produced a range of publications, videos and other information to help trustees of SMSFs.
Trustees are encouraged to access this information and review it. Information can be accessed from the ATO’s website (www.ato.gov.au).
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