This article is more than 24 months old and is now archived. This article has not been updated to reflect any changes to the law.


3 messages for SMSF trustees

3 messages for SMSF trustees:

  • new ATO Guide for SMSF Trustees
  • The SMSF residency trap gets tougher
  • 5% in-house asset deadline approaching

This month, ClearLaw takes a brief look at 3 issues that SMSF trustees should be aware of.

Paul Ellis

1. New ATO Guide for SMSF Trustees

In March, the ATO released a new guide on the roles and responsibilities of trustees of self-managed superannuation funds. The Guide is called Setting up a self-managed super fund — What you need to know NAT 71923-03.2009. It was released as part of the ATO's education program which was foreshadowed in the reforms in 2007.

In the opening statement to the Guide, the ATO announces that when it is considering possible action to take against a trustee who has failed to comply with the law, it will take into account whether the trustee followed ATO guidance.

You can access the Guide here.

2. The SMSF residency trap gets tougher

Since a previous edition of ClearLaw in which Maddocks advised about the residency trap for SMSF trustees, the law just made the trap much tougher.

The general rule The SMSF residency trap provides that if the central management and control of a SMSF — that is, the trustees or the directors of a corporate trustee — is ordinarily outside Australia, then the SMSF ceases to be an Australian superannuation fund. If that happens, the SMSF's assets and income are likely to be taxed at the highest tax rate.

Old escape from trap Under the old rules, SMSF trustees (or directors of the trustee) could return to Australia for 28 days in every 2 year period to be treated as "ordinarily in Australia" and so escape the trap.

New rule removes escape Under the new rules, if SMSF trustees (or directors of the trustee) are based outside Australia for 2 years, then the SMSF's central management and control will be outside Australia. In that case, the fund will not be an Australian superannuation fund. The legislation does not give the ATO any discretion.

People need to be mindful of this, and the other requirements for SMSFs to qualify for tax concessions. If an SMSF trustee (or director of the trustee) is planning an extended absence from Australia, they should seek legal advice.

3.5% in-house asset deadline approaching

Advisors and trustees need to be alert that the 30 June 2009 deadline is rapidly approaching by which they need to ensure that any of the following investments in an SMSF do not form more than 5% of the total market value of the SMSF's assets:

  • loans to, or investments in, related parties of the fund;
  • units in a related trust;
  • leases of assets to, or from, related parties (excluding business real property).

You can read further details about the in-house asset rules here


Lawyer in Profile

Paul Ellis
Paul Ellis
Special Counsel
PH: 61 3 9258 3524

Paul is a Special Counsel in the Maddocks Commercial team with particular expertise in commercial agreements for the supply of goods and/or services, the Personal Property Securities Act 2009, the National Consumer Credit Protection Act 2009 and the National Credit Code and the Australian Consumer Law.

Paul's key areas of practice include:

  • Australian Consumer Law;
  • credit and securities law;
  • commercial law and contracting;
  • government contracts; and
  • trust and superannuation law.

Before joining Maddocks, Paul was employed for 13 years with the Victorian Department of Justice, principally as a Deputy Registrar in the Victorian Magistrate's Court, but also as a legislation, policy and project officer for the Department.