Why do I need to know?
Having your own self-managed superannuation fund (SMSF) gives greater control over your superannuation. But with this control, also comes greater responsibility. It is crucial you understand your obligations of a trustee and ensure compliance so that you do not lose access to concessional tax treatments or face penalties.
This is the final installment in a three part series on SMSF and an overview of the roles and responsibilities of trustees.
If you have missed part one and part two, then please follow the links to read them first. Topics covered to date include the sole purpose test, separation of assets, investment strategy requirements, loans to members, accepting contributions, acquisitions from related parties and borrowing.
In this blog post, we continue to explore key areas that trustees need to understand and comply with.
Payment of Benefits
As a SMSF trustee, you must ensure that benefits are only paid in accordance with the preservation and condition of release rules outlined in the SIS Act, as well as the provisions of the trust deed. This is another reason to ensure your trust deed is reviewed regularly.
Limited Recourse Borrowing Arrangements (LRBA)
SMSFs are generally prohibited from being able to borrow subject to some very limited exceptions. These rules can be found under section 67 of the SIS Act and make reference to a structure called ‘Limited Recourse Borrowing Arrangements’ (LRBA).
Given the complexities, it is recommended that Trustees seek professional advice before entering into any contracts. You also need to ensure your bank account does not go into overdraft (if this facility is available) as this can be seen as a breach of provisions under the SIS Act.
As part of the administration of the fund, Trustees are required under various pieces of legislation to keep accurate records for prescribed timeframes. These include:
- minutes of all trustee meetings where matters affecting the fund (including investment decisions, starting a pension etc.) are addressed
- records of all changes of trustees
- annual financial statements regarding the position of the fund
- all annual returns lodged
ATO have produced a short video to highlight annual obligations.
The trustee must also ensure that they lodge an annual return for the fund by the due date, appoint an approved auditor to audit the fund for each income year, provide the auditor with required documentation, keep accurate records for the fund and hold relevant documentation (e.g. Tax File Numbers for the members).
There are set timeframes for record keeping of documentation related to the fund, for example, annual financial statements, accounting records and annual returns must be kept for a minimum of five years; whereas, records of meeting minutes, trustee changes and reports given to members must be held for 10 years.
There are also requirements for notifying the ATO of changes to trustees, directors of the corporate trustee, member changes or a change in address details.
As indicated above, the trustee must ensure an approved auditor is appointed to conduct an independent audit of the fund for each income year and provide them with all required documentation. The SMSF Annual Return cannot be lodged until the signed audit report has been issued.
CB Audit have specialized in the area of SMSF audits for many years and can assist you in this regard. Please contact us for more information if required.
Further details are available through the Australian Taxation Office (ATO) site –
Should you have any concerns/queries, our staff can assist with education and advising the types of documentation that can be collated throughout the year to ensure that all relevant information is available at the time of the audit. Our focus is on providing a high quality service to our clients and if we can value add by facilitating greater understanding of the relevant principles and strategies to be best prepared for an audit, then we’d love to assist. Please contact us to discuss any queries on 1300 CBAUDIT.
If you are not a current client and would like more information on our services, please contact Matt Williams through [email protected].