Basic Rules for Trustees of an SMSF

Basic Rules for SMSF Trustees

Is a SMSF right for you?
Here are some basic guidelines for Trustees of an SMSF:


Build your SMSF Support Team

You'll need an Accountant, an SMSF Auditor, a Financial Advisor, and possibly a Lawyer who can work together to support the Trustee of the SMSF.


Get your Personal Estate Planning in Place Now

Get your own financial house in order and establish your Will, Power of Attorney and Power of Enduring Guardianship documents.


Get to Know The Rules for Managing your SMSF

The ATO has useful information and instructional videos to assist Trustees of SMSFs you can see here.


Create your Investment Plan and Work on a Strategy

The ATO states, ‘SMSFs are required to prepare and implement an investment strategy to help meet their investment and retirement goals. The investment strategy is not designed to be a 'set and forget’ document but rather a strategy you continuously review to ensure you are meeting your retirement plans.’


Maintain the Liquidity Needs of your SMSF

The Trustee of an SMSF is required to regularly consider the liquidity needs of the fund and its members. As the purpose of your SMSF is to build up a pool of assets to sustain your lifestyle throughout your retirement, if the fund’s assets are primarily held in property, being a bulky assets, this may not give you the required liquidity.


Document your Decisions, Meetings & Strategy Reviews

Your SMSF Auditor will need to ‘evidence you are running a complying SMSF’ and this will require documentary evidence to support your good decisions.


Plan Ahead for the future transfer from the Accumulation Phase to the Pension Phase

Understand how ‘lumpy’ (relatively illiquid) assets may affect the funds ability to make the annual minimum drawdown each year in pension phase, to maintain the funds tax-exempt status, so a strategy to manage this phase will be needed ahead of time.


Stay Connected to Good Advice

The SMSF legislative environment continues to change and develop so Trustees of an SMSF need a way to maintain their knowledge of key changes and requirements. This is where building a long-term relationship with your advice team contributes significant value to your SMSF strategy.

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Self Managed Super Fund Advice-on-Demand

There are three main stages of managing a Self Managed Super Fund (SMSF) and depending upon what part of the journey you're in, your needs may be very different.

We find people new to their SMSF journey are usually at one of three main stages;

  • Establishment - Setting up their SMSF
  • Administration - Annual Tax and Auditing
  • Investment Advice - Documenting the SMSF's investment strategy and managing fund liquidity risks, for lumpy investment assets.

The Sole Purpose Test

All SMSFs need to comply with the sole purpose test, which requires the super fund to be run for the sole purpose of providing retirement benefits for members. Your SMSF needs to meet the sole purpose test to be eligible for the tax concessions normally available to super funds.

The sole purpose test applies to all super funds, not just SMSFs.

  1. The sole purpose test is essentially related to providing retirement or death benefits for, or in relation to, SMSF members.
  2. Specified ancillary purposes, which relate to the provision of benefits on the cessation of a member’s employment and other death benefits and approved benefits not specified under the core purpose.

You can read more about how it relates to SMSFs at the ATO website here.

Our Focus

An SMSF allows you to actively manage your own superannuation investments for your retirement. While SMSFs can potentially provide members with far more control and flexibility than big super funds,  that doesn’t mean it’s open slather. Breaking the rules can be costly and without ongoing professional advice, most Trustees would struggle to maintain an SMSF.

At Sapience Financial, we specialise in post-establishment SMSF investment advice.

  • We focus on SMSF liquidity insurances for funds that may have purchased 'lumpy' investment assets, like property, and
  • We focus on maintaining accurate SMSF investment strategy documentation after an SMSF fund has been established.

Ongoing Advice

Sapience provides advice-on-demand services for SMSF Trustees who don't necessarily wish to pay an annual ongoing retainer fee for a financial adviser, but who wish to engage our professional services on a fee-for-service basis, using our advice-on-demand service.

Regulation 4.09, of the SIS Regulations, asks you to consider diversification, not to be diverse. Similar to the insurance consideration, an SMSF is not required to hold life insurance. It just has to consider whether it should. The ATO asks trustees to have their investment strategy ready for their SMSF's auditor for their next audit.

SMSF Trustees need to consider diversity in their Investment Strategy, consider the fund's Liquidity Needs each year, and evidence to their SMSF Auditor that they're running a complying fund and up-to-date with all regulation changes. 

  • For SMSF clients using our Investment Strategy and Documentation service, we provide clients with meeting minutes for the Trustees to sign and file for their auditor's review as necessary.
  • For SMSF clients using our Liquidity Insurance Management service, we provide clients with meeting minutes for the Trustees to sign and file for their auditor's review as necessary.


How we can help

Having a clearly documented strategy for your SMSF is an important part of providing for yourself and your family into retirement while you plan to increase your investment returns to sustain your retirement.  Managing its ongoing updates and refinements, while making sure the fund's liquidity needs, enables it to meet the retirement needs of the SMSF members.

Contact us for a confidential chat about your SMSF needs.

Related: Featured SMSF Articles

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