A trustee’s basic duty is to know and understand all superannuation and tax laws and operate the SMSF within them and this does not change regardless of the fund’s structure.
Here are the other key responsibilities:
Be familiar and understand the laws and regulations governing SMSFs
An SMSF serves as an alternative to professionally managed super funds but both exist solely to secure the financial future of its members upon retirement. In this regard, it must adhere to superannuation regulations and tax laws.
SMSF trustees are expected to follow the governing rules and regulations and all trustees are held equally liable for any misconduct or shortcoming. Trustees may face fines and/or disqualification, depending on the situation.
Allocate time and resources for managing the SMSF
Establishing an SMSF begins with registering the fund with the regulatory bodies, such as the Australian Securities and Exchange Commission (ASIC) and the Australian Taxation Office (ATO).
Trustees are also required to prepare all necessary documents for continued operations and submit them annually. Requirements include but are not limited to the following:
- Annual tax return
- Annual audit
- Statements of accounts
- Asset valuation
- Actuarial certificates (for SMSFs with retirees claiming benefits)
- Legal and financial advice
Be aware of everything related to the SMSF’s finances
Unlike professionally managed funds, SMSF requires trustees to be responsible for collecting contributions, monitoring and documenting all actions related to funds, reviewing and protecting assets, and undertaking necessary legal actions associated with the SMSF, among others.
Every dollar must be accounted for and trustees must be able to provide the appropriate legal documents at any time the government checks up on the SMSF. They must also ensure that the fund’s members contribute the proper amount and receive appropriate benefits.
Trustees should be able to keep SMSF documentation safe and available—including Trust Declarations— for a period of at least 10 years.
Review, manage and apply investment strategies
Trustees are expected to review and discuss their investment strategies to determine if it still works for the SMSF. They must also collect proof that the strategy was discussed among them, such as a report on the decisions reached, and provide these to an ASIC-registered auditor on an annual basis.
Trustees should also regulate transactions involving the SMSF assets. SMSF regulations state that assets and investments should always reflect the true market value and that related party transactions are prohibited unless it is at a commercial arm’s length basis. Related parties are also not allowed to access anything that a trustee has included in the SMSF as their asset.
Properly handle membership contributions and benefits
One of the primary responsibilities of trustees is to ensure that everyone must contribute and receive proper benefits. However, it is not just a matter of depositing and withdrawing cash from the trust’s bank account.
Trustees must satisfy certain conditions both under super laws and their respective SMSF’s rules before the SMSF is allowed to release benefits to members or their beneficiaries.
Any instance of SMSF benefit release that does not satisfy the governing rules could get taxed at the highest marginal rate and penalties.
Seek expert advice
It is up to trustees whether they will seek the advice of experts, hire specialists, or brave the difficulties that come with managing an SMSF fund.
Think twice before accepting an appointment if the responsibilities are overwhelming.
This information has been sourced from the Australian Taxation Office.