Guide to the SMSF trustee declaration

Key legal compliance obligations that a trustee/director indicates they understand by signing the ATO’s SMSF trustee declaration include:

• Ensuring that the SMSF satisfies the sole purpose test. All Australian super funds (including SMSFs) must be set up for the sole purpose of providing retirement benefits to fund members (or to their dependants if any members die before retiring).
• Ensuring that they prepare, implement and regularly review the SMSF’s investment strategy. Trustees/directors must document an investment strategy as part of the SMSF set-up process.
• The requirement to act in the best interests of all fund members at all times, even if there is a relationship breakdown.
• The requirement that the fund’s assets must be kept separate from the personal use assets of trustees.
• Ensuring that fund member contributions comply with superannuation legislation
• Ensuring that members only access their SMSF balance if they have met a superannuation condition of release (such as retiring after reaching their preservation age, beginning a transition-to-retirement pension, or turning 65 years old).
• Understanding the range of investment restrictions under superannuation legislation (such as restrictions on lending and borrowing money, or from entering into investments that aren’t arm’s length transactions conducted at commercial market values).
• Understanding their ongoing administrative, reporting and record-keeping responsibilities, such as submitting an annual return to the ATO.
• Ensuring that an approved SMSF auditor is appointed to their fund each financial year. Approved auditors are registered with the Australian Securities and Investments Commission (ASIC). An SMSF auditor is responsible for analysing an SMSF’s financial statements and assessing its compliance with superannuation law. They must report any non-compliance issues to all fund trustees and the ATO.
• Ensuring that they make the ATO aware of any changes to fund trustees, directors or members within 28 days of the change occurring.

How and when to complete the ATO trustee declaration

The ATO trustee declaration can be downloaded from the ATO’s website here.

It’s important for trustees/directors to read the contents of the trustee declaration thoroughly prior to signing. They should seek professional advice on any responsibilities that they don’t fully understand.

Each individual SMSF trustee/director must sign and date a separate trustee declaration. They are each deemed to be equally responsible for the fund’s compliance, even if one or more trustees play a more active role in managing the fund than others, or if the any of the ongoing management tasks are outsourced to a third party.

Each trustee declaration must be witnessed by a person over the age of 18.

In addition, any legal representatives that are appointed to act as a fund trustee or director on behalf of a fund member should also sign a trustee declaration. This may be necessary for fund members who are aged under 18, who are deceased, or who have appointed a power of attorney to handle their affairs.

The ATO may ask a fund trustee or director to take an education course and to re-sign their  declaration if their fund is ever found to be non-compliant.

It’s not necessary to send your fund’s signed trustee declarations to the ATO unless they specifically request them. However, you should ensure that you store these documents in a safe place so you can access them if necessary.

How long do I have to keep my SMSF trustee declaration documents?

You need to keep your SMSF trustee declaration documents while your fund is operating and for a period of ten years after it is wound up. Failure to do say may incur a range of ATO penalties for all your fund’s trustees/directors.

What are the potential penalties for not completing an SMSF trustee declaration?

SMSF trustees/directors who do not thoroughly read and complete a trustee declaration form run the risk of not being aware of all their legal obligations. This can put their fund at a greater risk of non-compliance.

The ATO can impose a range of penalties on non-compliant SMSFs, depending on the severity of the non-compliance and the compliance record of fund trustees/directors. These penalties can include:

• Written directions for fund trustees/directors to rectify any non-compliance issues and to undertake a relevant education course to reduce the risk of future non-compliance.
• The fund losing its concessional tax treatment. Super funds in Australia (including SMSFs) are eligible for tax concessions. Member contributions and fund earnings in compliant SMSFs are taxed at the concessional super rate of 15%, up to certain contribution limits.
• Imposing fines on trustees/directors.
• Disqualifying trustees/directors and ordering that the SMSF be wound up.
• Prosecuting trustees/directors (which could lead to imprisonment).

The bottom line

SMSF trustees/directors must sign an ATO trustee declaration form within 21 days of their appointment. All members of an SMSF must be either a trustee or a director of their fund.

The information contained in this article is general in nature. It’s best to seek independent professional advice to ensure you understand all your legal compliance obligations before signing an ATO trustee declaration form.