From August 2012 a failure by the trustee of a self-managed
superannuation fund (SMSF) to keep its assets separate from assets
held by the trustee personally or from those of a standard-employer
sponsor (and their associates) is an offence punishable by a fine
of up to $17,000.
This requirement has always been a covenant included in SMSF
trust deeds by section 52(2)(d) of the Superannuation Industry
(Supervision) Act 1993 although the ATO has had no power to
The implications of this amendment have largely gone unnoticed
as the new regulation 4.09A was introduced at the same time as the
new market valuation rules. We expect the ATO to be much more
active in this area and it is likely to become another element the
ATO raises with SMSFs in the future.
Do you need a sole purpose trustee company?
It may still be possible to comply with the requirements where
you have individual trustees or a corporate trustee with other
assets or activities.
However, from our experience the ownership records for SMSF
assets are often not adequate to easily prove ownership and
therefore clearly satisfy this requirement. When this is combined
with incorrect bank records or poor record keeping, it can be very
difficult to prove the SMSF's ownership of assets.
Therefore, any SMSF that does not have a sole purpose company
acting as trustee is at a high risk of breaching this operating
standard. At Cooper Grace Ward, we strongly recommend that our
clients have a sole purpose company acting as trustee of a
Having a sole purpose trustee company also provides additional
benefits, such as:
easier and cheaper succession where a new member is added or an
existing member leaves or dies (as you do not need to have legal
documents prepared to change the trustee or change the ownership of
better protection for trustees from liabilities of the
better asset protection, as you do not need to prove ownership
to creditors of other entities in a bankruptcy or liquation.
What other steps should you take to ensure
It is essential that:
the SMSF has its own bank account opened in the name of the
SMSF trustee and referring to the SMSF
all income from SMSF assets is banked into the SMSF bank
account (without exceptions)
all assets are recorded in the SMSF trustee's name,
preferably with a reference to the SMSF
any transactions with related entities are properly documented
and undertaken in accordance with the documents
any land owned in Queensland discloses the SMSF ownership on
Where you do not have a sole purpose trustee company, a number
of issues can arise. For example:
Some financial institutions will only open the account in the
trustee name. This can therefore cause a problem where you have a
trustee with their own bank account for other activities.
You need to prove the ownership of land. This can be a problem
in states other than Queensland as it is not possible or practical
to disclose SMSF ownership on the title. In this case, it is
important that all other ownership records disclose the trust. For
example, the contract, rates and accounts for essential services
should disclose the trust where possible.
It is not possible to record the SMSF's ownership of shares
on the ASIC register. Therefore, the supporting documents for any
shares held by the SMSF should record the SMSF interest. Also, the
ASIC register should record that the trustee does not beneficially
own the shares.
Take steps now
CGW Structures can establish a special purpose company to act as
trustee for your SMSF for $741 (including ASIC fees and GST). This
company is eligible for concessional annual fees of $41.
Cooper Grace Ward can assist you with:
changing the trustee of your SMSF to a sole purpose
correcting the ownership records for SMSF assets.
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The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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