Guide to self-managed superannuation funds

Laws, rules and consequences

As an SMSF trustee, you must act according to your fund's trust deed and the super and tax laws. If there's a conflict between the super laws and the trust deed, the law overrides the trust deed.

At the heart of the super laws is a principle called the 'sole purpose test' - this means your fund needs to be maintained for the sole purpose of providing retirement benefits to your members (or to their dependants, if a member dies before retirement). As a trustee, you need to maintain your SMSF so that it complies with the sole purpose test at all times while your SMSF exists, including when investing fund assets and paying benefits upon retirement of members.

To protect members' retirement incomes, we regulate SMSFs to ensure they comply with the super law. Failing to comply is known as a contravention of the Superannuation Industry (Supervision) Act 1993 (SISA) or Superannuation Industry (Supervision) Regulations 1994 (SISR).

Our aim is to improve compliance and help you manage your SMSF. We do this through education, fund reviews and client services.

Where we find that you're genuinely making an effort to meet your obligations, we'll work with you to rectify any breaches.

Early access to super is illegal Schemes that try to get your super money out of existing funds early are illegal and fraudulent. If you participate in one of these schemes, you risk having to pay heavy tax and legal penalties. You also won't be eligible for any compensation under super law if your super fund suffers from fraudulent conduct or theft.

Consequences of failing to comply

If you fail to perform your duties according to the laws, the tax concessions that normally apply to your super may be affected and you may face penalties.

We will take a firm approach with you if you fail to make a genuine effort to comply, or if you set out to deliberately avoid meeting your legal obligations. Depending on the severity of the breach, we may:

• declare your fund to be non-complying - it will then be taxed at the top marginal rate
• prosecute you for failing to obey the law.

If we consider that the assets of your fund are at risk, we can take action to protect them. This may include:

• disqualifying you as trustee
• removing you as trustee
• freezing your fund's assets.

	For more information, refer to: Setting up a self-managed super fund (NAT 71923) Running a self-managed super fund (NAT 11032).
	Self-managed super funds - home

Sections within Setting up an SMSF

• What it means to be a trustee
• How your SMSF is regulated
• Laws, rules and consequences
• Step 1: Appoint an SMSF professional to help you set up and run your fund
• Step 2: Work out the structure of your fund
• Step 3: Make sure you (and the other members) are eligible to be a trustee
• Step 4: Check the residency of your fund
• Step 5: Create your trust and trust deed
• Step 6: Appoint your trustees
• Step 7: Record each member's tax file number
• Step 8: Open a bank account for your fund
• Step 9: Register with the ATO
• Step 10: Prepare an investment strategy