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Understanding SMSF trustee responsibilities

Self-managed super fund (SMSF) trustees have onerous duties and responsibilities in relation to the management of their fund.

An SMSF trustee primarily needs to ensure the fund is properly managed for the benefit of members for their retirement.

All trustees must ensure the fund assets are held in trust and invested on behalf of the members. Trustees need to ensure their fund complies with all super rules including super laws and the fund’s trust deed.

Trustees must regularly review and update the fund’s trust deed and investment strategy in accordance with the law and the needs of the SMSF’s members.

Another responsibility is to accept contributions and paying benefits (income streams and lump sums) in accordance with super laws and the fund’s trust deed. Trustees must also advise the Tax Office of any changes in trustees, directors or members within 28 days of the change taking place.

SMSF trustees also have the duty of undertaking various administrative tasks such as lodging annual returns and record-keeping, as well as ensuring an approved SMSF auditor is appointed for each income year.

Where a conflict arises between your wishes as a member and your legal responsibilities as a trustee, you must comply with your trustee obligations. For example, if a relationship breakdown occurs between members, you must continue to act in the best interest of all members at all times and in accordance to the trust deed and with super laws.

It is also critical to keep fund assets (including money) separate from your personal and business assets. Fund assets should be solely used for fund purposes.

Finally, trustees are reminded that member benefits (money or other assets) cannot be accessed earlier than what is legally permitted (generally, until a member reaches preservation age). Member benefits can only be accessed in very limited circumstances, i.e., severe financial hardship and so on.

Remember, contravention of any of the super laws can result in significant penalties, including fines and jail terms.

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News

Investing in shares vs property in SMSFs

March 19, 2020

Shares and property are two popular investment options for those with a self-managed super fund (SMSF). However, they both have very different attributes and choosing the one that will achieve the best outcome for an SMSF depends on your personal goals and situation.

While the price of shares can vary drastically, property is a relatively stable asset, making it appealing to those who want more security and predictability. Property prices are also negotiable unlike shares, and you can generally borrow money at a lower rate for property purchases.

It may seem hard to find the perfect investment property, but older and undercapitalised properties can be renovated for profit. However, returns from property rentals can be dented due to factors such as land tax, utilities and rates, maintenance and tenancy vacancies.

Shares are more dynamic and volatile than property. One advantage is the accessibility of investing in shares, as you can enter the share market with a few thousand dollars – much less than what you need to invest in a property.

Maintaining a portfolio of quality shares that pay tax-effective dividends may be a good way to fund retirement. With the right portfolio allocation, shares also have the potential to provide a better, stronger income than property rentals, as long as that income is sustainable and increasing.

Property can generally be used as a wealth-creation tool, while shares can create a reliable retirement income. For those who can afford to put more money into investments, it may be a good idea to consider investing and diversifying in both. If you’re unsure about which investment option is right for you, seeking financial advice may be the best option.