Key takeaways
- Trustees must run the fund only to provide retirement benefits (the sole purpose test).
- Fund assets must be kept separate from personal and business assets at all times.
- Trustees must act in the best financial interests of members and follow the trust deed and super law.
- Breaches can lead to penalties, an education direction, disqualification, or the fund losing its concessional tax status.
An SMSF puts you in control, and control comes with legal responsibility. Trustees are bound by the trust deed, the Superannuation Industry (Supervision) Act, and the ATO's expectations. You can engage professionals to help, but the duties remain yours.
Your core duties
- Sole purpose test. Run the fund solely to provide retirement benefits to members, or to their dependants if a member dies. No present-day benefit, such as living in a fund property.
- Keep assets separate. Fund money and assets must be held in the fund's name and never mixed with your own.
- Act in members' best financial interests. Decisions must serve the members' retirement, not other agendas.
- Follow the deed and the law. Operate within the trust deed and superannuation rules at all times.
- Have and follow an investment strategy. Document it, and review it regularly.
- Keep proper records and arrange the annual audit and return.
Things you cannot do
Some actions are clear breaches: accessing super before a condition of release is met, lending fund money to members or relatives, providing financial assistance to members, or acquiring most assets from related parties. The ATO treats these seriously.
The trustee declaration
Within 21 days of becoming a trustee, you must sign the ATO trustee declaration confirming you understand your duties. Keep it for the life of the fund plus ten years. Auditors and the ATO check for it.
What happens if you breach the rules
The ATO has a range of responses, scaled to the breach:
- administrative penalties (fines the trustee must pay personally, not from the fund);
- an education direction to complete an approved course;
- an enforceable undertaking to fix the issue;
- disqualification as a trustee; and
- making the fund non-complying, which carries a heavy tax cost.
The ATO's trustee guidance sets out these duties in full. The practical message is simple: stay engaged, keep good records, and ask before doing anything unusual.
Frequently asked questions
- Can I pay myself a fee for being an SMSF trustee?
- Generally no. Trustees are not paid for acting as trustee. A trustee who is also a licensed professional may be paid for genuinely separate professional services, under strict conditions, but acting as trustee itself is unpaid.
- Who pays an ATO trustee penalty?
- Administrative penalties are paid by the trustee personally and cannot be reimbursed from the fund. With individual trustees, each can be penalised; with a corporate trustee, one penalty applies to the company.
- Can I use my SMSF to help my business?
- No. Lending to or providing financial assistance to members or related parties, including your business, breaches the rules. Limited related-party investments exist but are tightly capped and conditional.
