SMSF trustee declaration - A basic guide

By Louise Chan

June 02 2018
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The declaration lists the duties a person must shoulder should they decide to be part of a self-managed super fund (SMSF) and the sanctions they may face if they fail to carry out their responsibilities. It is very important that trustees know what they are getting themselves into before signing the Trustee declaration form.

The declaration form can be downloaded from the Australian Taxation Office (ATO) website. It breaks down important SMSF matters into four key sections for potential trustees: sole purpose, duties, investment restrictions and obligations.

Introduction: Governing legislation

The opening section of the trustee declaration is a breakdown of legislation and possible sanctions that trustees must know. It states that the SMSF must comply with the Superannuation Industry (Supervision) Act 1993 and that they must answer to the Commissioner of Taxation.

As an introduction to the background literature that SMSF trustees must read, understand, and apply to the SMSF, it is also a reminder that each trustee must ensure that their fund complies with the most recent changes to the regulations.

It also lists the serious consequences that the trustees and fund could face for non-compliance.

Sole purpose

This section is a declaration of every single SMSFs’ purpose for existing—to work towards its members’ financial security for retirement.

This is a reminder that:

There is no higher purpose for the SMSF than securing its members’ retirement fund;
All actions relating to the SMSF must work towards this goal;
All personal interests must be cast aside.

Trustee duties

Trustee duties list the work that is expected of all trustees. This section is divided in two: the first subsection focuses on a trustee’s integrity while the second provides reminders of what a trustee’s job entails.

The first subsection conditions the potential trustee to keep both themselves and their co-trustees in check when it comes to managing the fund. Trustees must exercise the following while staying on track of the SMSF’s goal:

Honesty
Impartiality
Transparency

Trustees are also expected to prioritise SMSF interests over personal benefits.

For instance, a trustee may wish to change the SMSF’s investment strategy for potentially significant returns while the other members prefer to stay on their current investment track. In this case, the risk tolerant trustee must adhere to the decision of the majority.

The declaration also specifically states that a trustee must only accept contributions and release benefits in accordance with the governing laws and their SMSF’s conditions.

Investment restrictions

Rules and regulations mandate that trustees exercise an arm’s length basis for any transactions relating to assets of the fund. Discounts or special exceptions may not be arranged for the sale, loan, or acquisition of assets to relatives, fellow trustees, and other related individuals.

A trustee’s assets within the ATO SMSF may not be sold or purchased by anyone within the fund unless transacting at current market value. Using the asset as collateral to purchase another asset is also prohibited.

Administration

The last section lists a trustee’s administrative responsibilities for the SMSF. Documents relating to the SMSF’s transactions and operations must be kept in their files.

The trust must retain the following documents for at least 5 years:

Financial accounts
Financial statements
Annual returns
Operating statements

The following documents must be kept for 10 years:

Trustee meetings
SMSF decisions
Minutes of the meetings
Corporate and membership changes
All reports given to members

Trustees are also expected to hire an ASIC-approved auditor before filing their annual returns and notify the ATO of any changes within the SMSF.

Signing as a trustee is an automatic acceptance to be bound to all the requirements and expectations stated above.

This information has been sourced from the Australian Taxation Office.

About the author

Louise Chan

Louise is a content producer for Momentum Media’s nestegg who likes keeping up-to-date with all the ways people can work towards financial stability in 2019. She also enjoys turning complex information into easy-to-digest, practical tips to help those who want to achieve financial independence.

About the author

Louise Chan

Louise is a content producer for Momentum Media’s nestegg who likes keeping up-to-date with all the ways people can work towards financial stability in 2019. She also enjoys turning complex information into easy-to-digest, practical tips to help those who want to achieve financial independence.

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Retirement