As a trustee of a Self Managed Super Fund you are ultimately responsible for running your fund. It is therefore imperative that you understand the duties, responsibilities and obligations required of you. To assist you we have put together some useful information from the Australian Tax Office’s guide to SIS Act requirements.
Please note that although comprehensive, this article by no means represents the complete information you need to know. For more information, please refer to www.ato.gov.au
In accordance with the Superannuation Industry (Supervision) Act 1993, the minimum requirements of SMSF trustees bind you to:
- act honestly in all matters concerning the fund;
- exercise the same degree of care, skill and diligence as an ordinary prudent person in managing the fund;
- act in the best interest of all fund beneficiaries;
- keep the money and assets of the fund separate from other money and assets (eg. your personal assets);
- retain control over the fund;
- not enter into contracts or behave in a way that hinder trustees from performing or exercising their functions or powers;
- allow members access to certain information; and
- develop and implement an investment strategy.
When it comes to managing the fund’s investments you are, as the trustee, required to prepare and implement an investment strategy and regularly review it.
An appropriate investment strategy should specify the investment objectives of the fund and should be unique to the requirements of the fund and its members. It should also detail the investment methods the fund will adopt to achieve these objectives.
For example, the strategy should aim to maximise member returns while also considering the risk involved. It should incorporate diversification across multiple asset classes to reduce the risk of putting all your eggs in one basket. The fund should be in a position to pay benefits to retiring members and any administration costs, and should consider the needs of its members such as age, income and retirement needs as these will affect the objectives of the fund.
It is important to note that all investment decisions should be made in accordance with the strategy laid out for the fund. If you are unsure of whether a decision will align with the overall strategy objectives, you should obtain investment advice.
Also remember that it is essential to regularly review and update the strategy, at least annually, to ensure it remains relevant and effective.
Super funds are restricted with regard to investments and acquisition of assets. These restrictions exist to protect the fund members from unnecessary risk.
These restrictions are as follows:
- You must not secure the assets of a fund, ensuring ownership of investments is assured;
- Loans/financial assistance to members or a member’s relative are prohibited;
- You, as the trustee, are prohibited from borrowing money except in limited circumstances;
- Acquisition of assets from a related party is prohibited. There are some limited exceptions to this restriction such as business premises and listed securities, provided certain conditions are met;
- Regarding in-house assets, you are restricted from lending to, investing in or leasing to a related party of the fund more than 5% of the fund’s total assets;
- Investments must be made and maintained on an arm’s length basis and should always reflect a true market value;
- Special investment rules may apply to investments made before 11 August 1999; and
- Regarding investments in real estate, you must ensure the level of investment in business real property still meets the investment strategy of the fund.
It is imperative that you, as an SMSF trustee, understand your obligations and the restrictions placed on self managed superannuation funds and their trustees, in particular, the rules surrounding investment strategies. You must ensure that the investment strategy of your fund is relevant to its aims and delivers upon those objectives. If you are interested in obtaining more detail on the issues discussed above, please don’t hesitate to contact us on 07 3833 3999.
Source: Responsibilities of Trustees, Australian Tax Office.