Trustees of a SMSF

Who is Responsible for Setting up a SMSF?

The first thing we need to do is to work out who the members will be and who the trustees will be. Generally speaking, all members must be trustees, and all trustees must be members. There is an exception to this rule when members are of legal disability, such as not being over the age of 18. In this situation, parents can act as trustee on their behalf.

Who Are the Trustees?

The trustees of a SMSF are those who are authorised to act on behalf of the fund. They are the ones ultimately responsible for the fund, and responsible for maintaining the future benefits for the members.

When trustees are individuals, you must have at least two trustees, and they both must be a member of the fund. However, it is a good idea to establish a corporate trustee. A corporate trustee is a special purpose company set up to act as trustee of a self managed super fund. The benefit of this is that whilst all members must be directors of the corporate trustee (except in cases of legal disability), there only needs to be one member and one director.

The benefit of this is that if a member of a two member fund were to die, the fund could continue to operate as a smsf because there is a corporate trustee in place.

What Are the Trustees' Responsibilities?

The trustees of self managed super funds, or the directors of the corporate trustee, have strict rules by which they must adhere to. They must agree on an investment strategy, and they must act in accordance with the parameters it sets.

The rules are outlined in the Superannuation Industry (Supervision) Act 1993. The penalties for breach of the rules are harsh. They range from large fines to imprisonment.

Also, a smsf is only entitled to the generous tax concessions if the fund is deemed complying. If the ATO deems the fund to be not complying, the super fund is taxed as an ordinary trust, at the highest marginal rate. Plus, the entire assets of the fund are deemed to be income in the year that the fund is deemed non complying. The effect of this is to wipe out around half the value of the fund in the year it is deemed non-complying.