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.
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