SMSF – Trustees and trustee directors

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The Government always intended that self-managed superannuation funds (SMSFs) should be extremely small. The very idea of managing one’s own superannuation implies a fund over which all members should have the power of management, or indeed a fund with just one member.

The basic conditions of SMSFs are fundamental, yet individuals seem to be apt to breach them. This article describes briefly the requirements of every SMSF.

Basic conditions

The exact rules applicable to SMSFs depends on their composition. The following is a brief (and necessarily simplified) overview of the more important rules.

SMSFs with only one member and individual trustees:

  • must have two trustees; and
  • one of these trustees must be the sole member and the other must be a relative of the sole member.

SMSFs with only one member and a corporate trustee:

  • has the sole member as sole director of the corporate trustee; or
  • has the sole member and one relative as the two directors of the corporate trustee.

SMSFs with multiple members and individual trustees:

  • the number of members may not exceed 4; and
  • all members must be trustees.

SMSFs with multiple members and a corporate trustee:

  • the number of members may not exceed 4; and
  • all members must be directors of the corporate trustee.

Restrictions on employment or remuneration

The following additional requirements are relevant:

  • no SMSF individual trustee may be an employee of another unless they are relatives;
  • no SMSF individual trustee may receive remuneration from the fund for acting as such; and
  • no director of an SMSF corporate trustee may receive remuneration from the fund for acting as such.

Example: SMSF ceasing to satisfy basic requirements

X and Y are husband and wife and the only members and directors of the corporate trustee of their SMSF. They receive no remuneration for acting as directors of the corporate trustee.

In 2011/12, X and Y become legally separated. At Y’s request, X resigns as director of the corporate trustee. However, he purports to remain a member of the fund.

In this case, X and Y must both be directors of the corporate trustee in order for the SMSF to comply with legal requirements. The SMSF becomes non-compliant as soon as X resigned.

It might have been advisable for X rather to seek legal advice on transferring his share of the SMSF assets in specie to a new and separate SMSF. Only then ought he to resign.

Conclusion

If you have any issues regarding an SMSF member moving overseas, call LAC Lawyers and we can provide advice and assistance.

 

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