Since the introduction of super choice legislation took effect back in July 1st 2005, this has prompted many people to evaluate whether they should transfer their retirement savings into an SMSF (Self Managed Super Fund).
Obviously, the Australian Tax Office (ATO) was aware of this and has - over time - issued press releases and addressed the issue at conferences, on the importance of trustees of SMSFs keeping their fund/s compliant.
The ATO's pet bugbear is “Keeping Assets in the Fund Name" - something they have been reminding fund trustees to do for quite some time now. In fact, it's been rather a common topic in any speeches or press releases.
However, this is actually slightly incorrect or confusing. . .
You see, since trusts aren't actually separate legal entities (which is why they have a “trustee"), legal title to assets can not be registered in a fund's name. Instead, they must be registered in the trustee's name.
What the ATO is really doing is just reminding trustees of their obligations, under the Superannuation Industry (Supervision) Act 1993, to “keep the money and other assets of the entity separate from any money and assets" of the trustee or, say, the employer sponsor (see s52(2)(d)).
What you should be doing is recording assets as being held by the trustee (for example: “on behalf of the Peters Family SMSF"). This legal requirement to keep assets separate is crucial and the ATO will continue to police this vigorously now and in the future.
In fact, they announced that from 1 July 2005, if auditors reported a contravention, “trustees will be subject to scrutiny". Yikes!
Record Keeping - Another Bugbear
The ATO also expressed increasing concern at the lack of records kept by SMSF trustees. Obviously, keeping accurate documentation enables SMSF trustees to prove their compliance with the law, including the duty to give effect to an investment strategy, keep assets separate and keep track of changes of trustees.
The ATO also pointed out that many SMSF trustees failed to document lease arrangements - another big no no!
At the end of the day, keeping these kinds of records and documentation isn't difficult - certainly not when they help ensure the fund stays legal (and, it keeps the ATO off your back!). . .
As of July ‘05, the ATO began contacting SMSF's to verify important details such as number of members, trustee structure & contact details. If they found non-compliant fund, they required the trustees to fix the problem and bring the fund back into compliance.
Essentially, what the ATO did was ramp up its regulatory supervision of SMSFs. Albeit a gradual process, trustees now need to expect a more interventionist action on the ATO's behalf.
In closing, if you are the trustee of a Self Managed Superannuation Fund, you NEED to keep on top of the legal requirements for keeping the fund compliant under the Act. No more excuses - not that the ATO is known to be soft on non-compliance at the best of times.
Christopher is an internationally recognised plain language expert whose clients include 8 major national law firms, 10 public listed companies, 5 government bodies, the ASX, the United Nations and the European Central Bank.
His company Cleardocs - http://www.cleardocs.com - provides automated standard legal documents online - at significantly lower prices than traditional lawyers and accountants. The master documents and question interfaces are written in market-leading plain language and signed-off by the 100-lawyer Melbourne and Sydney law firm, Maddocks.
If you need an SMSF or to update a Self Managed Super Fund , you can do this online at Cleardocs any time of the day or night. All documentation is emailed to you within 20 mins of completing the process.