02.Self-managed super funds
SMSF’s are regulated by the Australian Taxation Office (ATO) and perform the same role as other super funds: collecting and investing your contributions and making them available to you when you retire. The difference is that as a fund member you’re also a trustee who controls how to invest your contributions and pay your own benefits.
An SMSF can have up to four members. They will almost always be family or close business associates.
As trustee you’re ultimately responsible for running the fund. You need to know the legal requirements and administrative responsibilities.
The ATO has recently announced it will take a “firm approach” with trustees who don’t comply with its rules.
Each fund needs to be independently audited annually. The audit includes an assessment of the fund’s overall compliance with the rules and a financial audit. Auditors previously reported problems and breaches to the trustees who could then take appropriate action, but they must also report them directly to the ATO, which means the ATO may prosecute.
Penalties can range from asking the trustees to offer an undertaking to the ATO to correct the problems, to civil and criminal actions with high financial penalties and/or five years’ imprisonment.
The ATO can also make the fund non-complying, which has dire financial consequences for its members as it means that the fund’s assets and income may be taxed at a penalty rate instead of the concessional super tax rate of 15%.