|Article written by Law Central – Legal Documents Online (Bulletin 432 – 5 Apr 2013)|
Being a trustee of a self-managed superannuation fund (SMSF) comes with a string of responsibilities and obligations. If you are a trustee (or a director of a corporate trustee) of a SMSF, it is important you discharge your obligations to avoid being struck with heavy penalties.
The Australian Tax Office (ATO) requires all new trustees to complete and sign a Trustee declaration to demonstrate that they understand their duties and responsibilities under super law. This must be completed within 21 days of becoming a trustee. Late last year, the Trustee declaration (NAT 71089) and accompanying fact sheet (NAT 71128) was updated by the ATO.
If you are a SMSF trustee and have previously signed the Trustee declaration, it is in your best interests to revisit the updated version of this document. This update applies to anyone who has become a SMSF trustee since July 2007, even if the SMSF was established prior to this date.
The ATO has made three major changes to the Trustee declaration. These include:
1. A requirement to review the investment strategy of an SMSF on a regular basis.
All SMSF trustees must regularly review their fund’s investment strategy taking into account all relevant circumstances such as the risk, return, liquidity and diversification of any investments made.
2. A requirement to consider whether the SMSF fund should hold insurance cover for its members.
As a trustee of an SMSF, the ATO requires you to consider taking out insurance for the members of the fund. There is no minimum level of insurance and it is not mandatory. However to avoid a penalty of up to $110,000 make sure you keep evidence that you have at least considered taking out an insurance policy for one or more members of the fund. This can be done by documenting it in your fund’s investment strategy or in the minutes of trustee meetings. Make sure to document that the trustees of the fund have considered taking out insurance when you first implement your investment strategy and each time you regularly review it.
3. A declaration from the trustees of the SMSF that they are aware of not having access to the government’s financial assistance program in case of financial loss due to theft or fraud.
The ATO now requires all trustees to declare that they have no access to the government’s financial assistance program that is available to trustees of the Australian Prudential Regulation Authority (APRA) regulated funds. Financial assistance can be accessed in cases of financial loss due to fraudulent conduct or theft.
If your SMSF suffers loss due to fraud or theft, legal options are available in some circumstances under corporation’s law. You may also approach the Financial Ombudsman Service if the fraudulent conduct was committed by a member of the fund.
Alternatively, if you want your super to be covered by the financial assistance program, you can choose to join an APRA (Australia Prudential Regulation Authority) regulated fund or appoint a registrable super entity licensee as a trustee and become a small APRA fund.
Gold and Platinum Members Read on to find out more about APRA funds…
I have completed the declaration, now what?
Once you have signed the declaration, do not send it to the ATO. The declaration must be kept with your SMSF records for at 10 years, or for as long as you remain trustee – whichever is longer.
All sounds like a hassle? Law Central will take care of this for you. Use our Investment Strategy for Self-Managed Super to make sure you comply with all the regulations.
ATO Claims Inactive Super
Previously, any superannuation accounts with balances of less than $200 could be claimed by the ATO provided they had been inactive for five years.
This year the ATO has ramped it up a notch claiming unidentified balances of up to $2,000 unless contributions have been made in the past twelve months.
Not only will this improve the government’s short term budget position, but it may also benefit superannuation holders. Sounds crazy right? It has been argued that this move will benefit the owners of lost superannuation accounts because the fees charged by super funds are likely to exceed any earnings made.
These reforms will also reduce the number of superannuation accounts with unidentified members. This provides an incentive for super funds to collect sufficient information to identify their members when they make contributions.
Never fear! Individuals can reclaim superannuation accounts transferred to the ATO at any time. Previously no interest was paid to these individuals. However this year, the ATO will pay interest on these accounts at the rate of the consumer price index. Therefore accounts are more likely to retain their real value if reclaimed by their long lost owners.
So these reforms may not be all bad. But it is best to get your super in check to maximize your earnings with an efficient investment strategy. Use Law Central’s Investment Strategy for Self-Managed Super to maximise your returns with ease.