A recent survey* revealed that a third of SMSF trustees aren’t aware of their compliance obligations.
This is serious stuff, because even if someone else is managing the fund for you, it’s your responsibility to comply with the rules and regulations. And unfortunately, the ATO won’t accept ignorance as an excuse for non-compliance.
A Self Managed Super Fund can be a good alternative to a commercial fund when it comes to growing your retirement money. SMSF advocates are typically looking for flexibility as often there are greater investment options and greater control over investment assets. Running costs can be significantly lower, and they can be tax effective – depending on personal circumstances and the investment strategy of the fund. No doubt these can be seen by some as distinct benefits.
But with these benefits comes additional responsibility. The words “Self Managed” mean you (the trustee) are responsible for making sure your fund measures up. And what many don’t understand is that this accountability is non-transferable – it doesn’t matter whether you have a plethora or professionals working on your fund – the onus is on you to ensure it complies.
Never make the mistake of thinking an SMSF is a “set and forget” type of fund; this is far from the truth. These funds take time and effort. You need to know what you’re doing, as the compliance obligations are the same as any regular super fund.
Trustees are required to develop strategies for investing savings, as well as being responsible for managing the withdrawals and contributions to the fund. SMSFs require compliance with government superannuation laws; and have strict recordkeeping, reporting and auditing requirements. Trustees must also appoint an approved SMSF auditor to independently audit the financials and compliance status of the fund at the end of each financial year.
The ATO got tough on penalties in July 2014 and there are a range of penalties they can impose for non-compliance. Failure to prepare financial statements or sign the SMSF trustee declaration could mean an $1800 fine and if there are 2 trustees – that’s $1800 each. Certain infringements can lead to trustees being disqualified and fund assets frozen. To add insult to injury, you must pay the fine from personal assets; you can’t pay it with SMSF assets. Education is important for trustees to best understand their obligations as an SMSF trustee and to help avoid the pitfalls of non-compliance. The ATO can make those trustees who break superannuation laws undertake mandatory trustee education … but perhaps it should be mandatory for all trustees?
When it comes to your finances, education and awareness is the key. It’s all well and good to appoint someone else to do all the work for you, but at the end of the day, it’s your retirement money. Why wouldn’t you want to know as much as possible?
Unsure what your role and responsibilities are as an SMSF trustee? Download this guide.