Before becoming a trustee of an SMSF, you need to be aware of the responsibilities that it entails.
SMSFs are closely regulated by the ATO and have rules that dictate who is legally allowed to run them. While anyone 18 years old or over can be a trustee or director of an SMSF, they must not be under a legal disability such as mental incapacity, or a disqualified person.
The ATO can take action to disqualify an SMSF trustee. The most common reason is for illegal early access breaches. There are other ways a person may become disqualified and some may not even realise they have been. Continuing to act as an SMSF trustee or director of the corporate trustee while disqualified is an offence, and further penalties may apply.
Typical things that can disqualify an individual are:
- Having been convicted of an offence involving dishonesty.
- Being subject to a civil penalty order under the super laws.
- Being insolvent under administration (including being an undischarged bankrupt).
- Having been disqualified by a court or regulator (for example, by the ATO or APRA)
The ATO has a disqualified trustees register to see if an individual has previously been disqualified. The register provides information and easy search options to help determine whether a potential trustee has been disqualified. It is updated quarterly and includes all individuals who have been disqualified since 2012, the year that the information was first published electronically.
There are two options a fund can take when a trustee has been disqualified. The first is to roll over the disqualified person’s member benefits to a large (APRA) superannuation fund, such as an industry or public offer fund. The second is to convert the SMSF into a Small APRA Fund (SAF) by appointing an APRA approved trustee.
Trustees or directors of a corporate trustee run the fund and make decisions that affect the retirement interests of each fund member, including themselves. It is in the members’ best interests to remain aware of which trustees are or may be disqualified and how a trustee may become disqualified.
If you have any questions about the information above please contact the team at Abbotts, we will be happy to assist you. You can reach us by email (firstname.lastname@example.org) or telephone ((08 9321 2642).