Here’s a quick guide on how to become an SMSF trustee in spite of the responsibilities and risks.
Confirm your eligibility
Ensure that the Australian Taxation Office (ATO) commissioner does not find a reason for disqualification by meeting these eligibility requirements:
- Must be at least 18 years old (a legal representative may act on behalf of minors)
- Are not legally disabled (i.e., mentally incapacitated)
- Have not been convicted of offences relating to dishonesty
- Have not been penalised under super laws
- Have not been disqualified by regulators (e.g., ATO) or the court
- Are not insolvent under administration (not under financial distress such as bankruptcy)
The SMSF is managed for the retirement benefits of its members. This means all trustees should have assets within the fund.
Get appointed as a trustee
There are actually two ways to become an SMSF trustee: the first option is to join an existing SMSF as a trustee and the second is to establish an SMSF.
Joining an existing SMSF
Appointed trustees to existing SMSFs only need to sign the trust declaration and other existing legal documents pertaining to the fund within 21 days of appointment.
After signing legal documents, the SMSF needs to confirm the new trustee’s appointment by informing appropriate regulators and amending their fund’s documents. This may be costly for SMSFs, depending on its structure, so ensure proper understanding of the fund’s objectives.
Registering a new SMSF
Decide what kind of trust to create. The number of people involved in the SMSF depends on its structure—especially if it is a single-member fund—so knowing the differences between an individual and corporate trustee is important.
Know, understand and perform responsibilities
All trustees are equally responsible for managing the SMSF. Make sure to contribute to the management of the fund.
Any error or shortcoming by one trustee can affect all other members or even the whole fund. Regulatory bodies do not accept excuses such as “but that wasn’t my mistake”.
Prepare for the worst
SMSFs are meant to financially secure its members’ throughout their retirement, but unexpected events such as terminal illness and sudden death can happen.
Trustees are responsible for ensuring that the deceased member’s nominated beneficiaries will receive the appropriate benefits as outlined by Super and tax laws and the trust deed. It’s also important to prepare for what could happen to the fund if any change in membership occurs.
This information has been sourced from the Australian Taxation Office.