SMSF’s represented the largest single vehicle in the superannuation sphere, holding 30.6 per cent of superannuation assets at 30 June 2008. This outpaces retails funds with 29.1 per cent of superannuation assets.

While SMSF’s are a great vehicle for those who want to take a hands-on approach to their super, the ATO says those contemplating establishing one need to ask themselves six key questions beforehand.

Prospective SMSF trustees and directors of a trustee company need to be able to answer all six with a resounding ‘yes’ before kicking off their SMSF.

Failure to understand trustee responsibilities and the rules applying to SMSF’s could lead to the fund being found non-compliant and its assets taxed at the highest marginal rate.

First, what are all the trustee’s options?

Second, do they have sufficient assets, time and skill to be a trustee? Prospective trustees should examine their options with licensed and qualified advisers, particularly in regard to the costs of establishing and running an SMSF.

Third, does a trustee have the skills to execute a suitable investment strategy? All trustees should understand they are all equally responsible in their roles.

Fourth, a trustee’s role is separate to their interest as a member. This is difficult, particularly where a trustee invests in unlisted assets. Would they be comfortable with investments in related parties or collectibles even if these did not breach the Superannuation Industry (Supervision) Act (SIS Act)?

Fifth, do they understand the laws relating to SMSF’s and keep up-to-date with changes, including the sole purpose test, borrowing, business real property, the giving of assistance, the acquisition of assets from related parties, and the definition of an “in house” asset.

Finally, is the trustee fully across the compliance requirements of SMSF’s? Since 1 July 2007, new trustees in SMSF’s have had to sign a declaration attesting to their understanding of their roles and duties.

Disclaimer: This is not advice. Items herein are general comments only and do not constitute or convey advice per se. The information contained in this article is for guidance only and should not be relied upon without obtaining professional advice having regard to your specific circumstances.
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