If you’re thinking about setting up a self-managed super fund (SMSF) or already acting as a trustee, it’s important to understand what the role really involves. While an SMSF can offer greater control over your retirement savings, it also means you may be responsible for helping the fund stay compliant and act in the best interests of all members.
In this guide, Trusted Finance Solutions will help you understand the key responsibilities and legal duties of SMSF trustees in Australia. With insights from the ATO and other trusted sources to help you manage your fund with confidence.
What It Means to Be an SMSF Trustee in Australia
Every self-managed super fund relies on a trustee to make important decisions about how the fund is managed. This can be an individual or a company, but either way, the responsibility lies with those in charge, not with external professionals like those in industry or retail super funds.
The primary role of a trustee is to ensure the fund is managed primarily to provide retirement benefits to its members. This responsibility is outlined under Australian superannuation law, specifically the Superannuation Industry (Supervision) Act 1993, or SIS Act.
If these duties are not followed, trustees may face penalties, removal from their role, or, in more serious cases, legal consequences. It is a position that calls for a solid understanding of the rules and a strong commitment to staying compliant.
Who Can Be an SMSF Trustee?
Before setting up a self-managed super fund, it’s important to understand who can act as a trustee and how SMSF trustee structures work in Australia. There are two main types of trustee structures:
- Individual trustees – all members are appointed as individual trustees
- Corporate trustee – a company acts as trustee, and all members are directors
Each structure has pros and cons. For example, choosing a corporate trustee may provide easier succession planning and more straightforward administration as the fund becomes more complex.
To qualify as an SMSF trustee or as a director of a corporate trustee, you must meet certain legal requirements:
- Be at least 18 years old
- Have legal capacity
- Not be a disqualified person (such as someone who is bankrupt or convicted of a dishonest offence)
Under Australian superannuation law, all members of the SMSF must also be trustees (or directors, in the case of a corporate trustee), and all trustees must be members. The only exceptions are in specific cases, such as when a member is under 18 or has an enduring power of attorney in place.
Trustee Declaration and Education Requirements
All new SMSF trustees must sign a Trustee Declaration within 21 days of being appointed. This document confirms that you understand your legal responsibilities as a trustee.
While ongoing education is not mandatory after setup, it is strongly encouraged. The ATO provides free online learning modules and a trustee toolkit to help you stay on top of your obligations and manage the fund with confidence.
If you’re unsure about a specific duty, like whether your SMSF can purchase a property, a mortgage broker can help you understand what’s allowed and how lending works. Contact us today!
Legal Duties of SMSF Trustees Under Australian Law
Trustees of SMSFs operate under the Superannuation Industry (Supervision) Act 1993 (SIS Act), which outlines strict obligations designed to protect fund members and uphold the integrity of Australia’s superannuation system. These legal duties include:
1. Act honestly in all matters concerning the fund.
This obligation ensures that trustees conduct their duties with integrity and transparency.
2. Exercise care, skill, and diligence.
Trustees are expected to make thoughtful and informed decisions when managing the fund, even if they are not financial experts.
3. Act in the best financial interests of all members.
Decisions made should prioritise the financial well-being of the fund’s beneficiaries.
4. Keep fund assets separate from personal or business assets.
Keeping your SMSF’s assets completely separate is essential for maintaining the fund’s integrity and staying compliant with superannuation rules.
5. Avoid prohibited transactions.
Trustees must not engage in activities such as lending money to members or relatives, which are explicitly restricted under the SIS Act.
6. Ensure compliance with superannuation and tax laws.
Trustees are responsible for adhering to all relevant legislation to maintain the fund’s complying status.
These obligations apply whether you’re managing investments, making pension payments, or deciding on fund strategy. Breaching any of them can result in penalties, or even disqualification as a trustee.
Prohibited Behaviour and What Trustees Must Avoid
Even minor mistakes can lead to compliance issues, so it’s important for SMSF trustees to understand what actions are not allowed. Some of the most common breaches include:
- Accessing super before meeting a condition of release
- Lending money to members or their relatives
- Using fund assets for personal benefit, such as holiday homes or collectibles
- Mixing personal and SMSF finances, including using the same bank account
- Exceeding the allowable limit for in-house assets, which is generally capped at 5 percent of the fund’s total value
Avoiding these actions is essential to keeping your fund compliant with superannuation law. A clear understanding of what is and isn’t permitted can help you manage the fund more confidently and reduce the risk of penalties.
Managing Trustee Changes and Ensuring Continuity
Trustee roles within an SMSF will not always remain the same. A trustee may choose to resign, become unable to act due to illness, or pass away. These events can affect how the fund operates and may create compliance challenges if not properly managed.
To manage these situations smoothly, it’s important to have a clear succession plan in place. An SMSF should:
- Have a current enduring power of attorney to allow a trusted person to act on behalf of a member who becomes incapacitated.
- Ensure the trust deed is regularly updated and clearly outlines the process for removing or appointing trustees or directors.
- Consider using a corporate trustee structure, which may offer greater flexibility and simplify the process when members join or exit the fund.
When a change in trustees occurs, the following steps must be taken to remain compliant:
- Notify the ATO within 28 days of the change.
- Update the trust deed and company register if operating under a corporate trustee.
- Appoint a replacement trustee or director within six months to ensure the fund continues to meet its legal requirements.
In cases where a member passes away or becomes legally incapacitated, a legal personal representative, such as an executor or a person holding an EPOA, may act on their behalf.
Key Responsibilities of SMSF Trustees
SMSF trustees in Australia must ensure the fund stays compliant and eligible for tax benefits. Below are the key responsibilities each trustee must manage:
1. Sole Purpose Test
An SMSF must be maintained to provide retirement benefits to its members, or death benefits to their dependents when applicable. Trustees must not use fund assets for personal benefit. This includes situations such as living in a fund-owned property or accessing funds before retirement. Breaching this rule may result in significant penalties or the fund losing its complying status.
2. Investment Management
Trustees are required to prepare and maintain a written investment strategy that reflects the fund’s objectives and members’ circumstances. This strategy should be reviewed regularly and consider factors such as diversification, liquidity, risk tolerance, and the need for insurance.
Investments must be made on a commercial basis and comply with super laws. This means avoiding actions like lending to members or investing excessively in related-party assets. For instance, if the fund owns a residential property, it must be rented out at market rates and cannot be used by a member or a relative.
3. Record-Keeping and Administration
Accurate and consistent record-keeping is essential for demonstrating that your SMSF is meeting its legal and compliance obligations. Trustees are required to maintain clear records, including financial statements, contribution and payment details, and minutes of all key decisions made in relation to the fund.
The Australian Taxation Office (ATO) sets specific minimum retention periods:
- Financial and accounting records must be kept for at least five years
- Trustee declarations and meeting minutes must be retained for at least ten years
Maintaining well-organised documentation not only helps during audits but may also support better decision-making and reduce the risk of compliance issues over time.
4. Lodgement and Reporting
Each year, trustees must ensure the fund lodges its SMSF Annual Return with the ATO and appoints an approved SMSF auditor. The auditor must be engaged at least 45 days before the return is due and must review both the fund’s financial statements and compliance status.
Trustees are also responsible for ensuring the correct taxes are paid, including the standard 15 percent income tax rate that applies to most SMSF earnings. If the fund holds assets for longer than 12 months, a capital gains tax discount may apply.
Missing reporting deadlines or failing to meet audit requirements can lead to administrative penalties and increased regulatory scrutiny.
Risks and Penalties for Non-Compliance
The ATO has broad powers to enforce SMSF compliance, and trustees who breach the rules may face serious consequences. Even if the breach is unintentional, failing to meet your obligations can put the fund’s complying status at risk.
Potential penalties for non-compliance include:
- Financial penalties, which are personally payable by each individual trustee
- Disqualification from acting as an SMSF trustee
- The fund being declared non-complying, which may result in the loss of tax concessions and significant tax liabilities
Maintaining accurate records, meeting lodgement deadlines, and avoiding prohibited conduct are all important steps in reducing the risk of penalties and keeping your SMSF on track.
Working with Professionals While Managing Trustee Duties
While SMSF trustees can outsource certain tasks, they cannot delegate their legal responsibility. Trustees remain accountable for all decisions and must ensure the fund stays compliant with superannuation laws and ATO requirements.
Professional services can provide valuable assistance with:
- Accounting and tax reporting – SMSF accountants can manage financial statements and annual returns.
- Ongoing administration – SMSF administrators help with record-keeping, compliance, and documentation.
- Investment advice – Licensed financial advisers provide tailored guidance based on the fund’s strategy and member goals.
- SMSF property loans – SMSF Mortgage brokers can help structure finance solutions such as limited recourse borrowing arrangements (LRBAs).
It’s important to choose qualified professionals who hold appropriate licences under ASIC regulations. Trustees should also keep records of any advice received and decisions made.
Even with professional help, staying informed and actively involved is essential. Relying on others does not remove a trustee’s legal obligations.
Tips for Staying Compliant as an SMSF Trustee
Staying on top of your responsibilities as an SMSF trustee is essential for maintaining compliance and protecting the fund’s tax concessions. Here are four practical ways to help you manage your duties effectively:
1. Complete the ATO Trustee Education Program
This free program is especially useful after a compliance breach, but it can also serve as a valuable refresher. It helps trustees better understand their legal obligations and how to manage an SMSF correctly.
2. Review the Investment Strategy Each Year
Make sure the investment strategy is reviewed at least once a year or whenever there is a significant change in a member’s situation. This ensures the fund continues to meet members’ needs and aligns with regulatory expectations.
3. Keep SMSF and Personal Assets Separate
Keep the SMSF’s bank accounts and financial records separate from your personal finances. Avoid any personal use of fund assets to reduce the risk of compliance issues.
4. Monitor Important Deadlines
Keep track of important deadlines, including audit dates, tax return submissions, and minimum pension payments, to help ensure your fund stays compliant. Taking timely action may reduce the chance of penalties or the need for ATO intervention.
By staying engaged and informed, SMSF trustees can better support the long-term success and compliance of their fund.
Stay on Top of Your SMSF Trustee Responsibilities with the Right Support
Acting as an SMSF trustee can offer more control over your super, but it also brings significant legal and financial responsibilities. By staying informed, following ATO guidance, and seeking professional support when needed, trustees can protect their retirement savings and reduce the risk of penalties.
If you are unsure whether you are meeting all your obligations, it may be worth speaking with a licensed SMSF specialist or a mortgage broker experienced in SMSF lending. Trusted Finance Solutions offers personalised guidance on SMSF loan strategies and can help you navigate lending options while staying aligned with superannuation regulations.
Managing an SMSF is a big responsibility, but you do not have to figure it all out alone. Speak with our mortgage brokers in Melbourne for clear, personalised support.
SMSF Trustee FAQs
Yes, you can be a trustee of more than one SMSF, as long as you meet the eligibility requirements for each fund. However, managing multiple SMSFs means taking on multiple sets of legal and compliance responsibilities, including separate reporting, record-keeping, and investment strategies for each fund. It’s important to be confident in your ability to manage the duties involved across all funds.
If a trustee decides to leave the SMSF, the fund can continue as long as it still meets the legal requirements. The remaining trustees will need to update the trust deed, formally remove the outgoing trustee, appoint any replacements if needed, and notify the ATO within 28 days. Bank accounts, ownership of fund assets, and other records must also be updated to reflect the change.
To switch to a corporate trustee structure, you will need to register a company with ASIC and appoint all SMSF members as directors of that company. You’ll then update the SMSF trust deed to reflect the change, transfer ownership of fund assets into the name of the company, and notify the ATO and any relevant institutions. This process involves some paperwork and setup costs, but it may offer long-term benefits in terms of administration and succession planning.
No, trustees are not required to notify the ATO every time the investment strategy is updated. However, the strategy must be reviewed regularly and documented properly. Trustees should ensure that any changes are clearly recorded in meeting minutes or fund records in case the ATO reviews the fund during an audit.
Yes, under current Australian law, an SMSF can have up to six members. If the fund has individual trustees, it must have at least two and no more than six. If it uses a corporate trustee, the company can have one to six directors, and all members must be directors. This limit helps keep the fund manageable and compliant with superannuation rules.
