SMSF Minutes & Resolutions Package
- How can the SMSF trust deed be varied?
- In what circumstances can I change the name of an SMSF?
- Are there are any restrictions on the name of an SMSF?
- What is an SMSF investment strategy?
- Does an SMSF trustee have to insure the members?
- What is the role of an SMSF administrator?
- When can an SMSF appoint an administrator?
- Who can act as an SMSF administrator?
- Who can audit an SMSF?
- What financial statements must be prepared for SMSFs?
- Who can prepare financial statements for an SMSF?
- Do the financial statements for an SMSF need to be audited?
- What is a reserve?
- When can a trustee create and use reserves?
- What kind of reserves are there?
- Why does an SMSF create and use reserves?
- How should reserves of an SMSF be managed?
- When can an SMSF be wound up?
- How is an SMSF wound up?
- What must the trustee do with members' benefits when the SMSF is wound up?
- Do I need a Director Identification Number?
How can the SMSF trust deed be varied?
You will need to check the terms of your SMSF trust deed to see how the deed can be varied.
If your SMSF has a Cleardocs trust deed: The fund's trust deed can be varied by resolution or deed. If there is an employer sponsor, then you need it to consent.
If your SMSF does not have a Cleardocs trust deed: You will need to review the terms of your trust deed to determine how the trust deed can be varied and whether any person is required to consent to the variation. You should obtain professional advice about how to vary the trust deed.
In what circumstances can I change the name of an SMSF?
You can change the name of your SMSF whenever you like, and as many times as you like. It will generally require you to:
- vary the fund's trust deed – read more about this here; and
- notify the ATO.
Are there are any restrictions on the name of an SMSF?
No, there are no restrictions on the name of an SMSF. You may call an SMSF whatever you like.
You need to be mindful that:
- you may be sued if you use a name which is misleading or deceptively similar to another name (for example, if the name of your SMSF states or implies some kind of association you do not have); and
- you will not be able to give a corporate trustee a name which is identical to an existing company or business name.
If you are unsure about what to name your SMSF you should obtain professional advice.
What is an SMSF investment strategy?
Superannuation law requires all SMSFs to have an investment strategy (or strategies) — a framework for making investment decisions with the goal of increasing members' benefits for retirement.
There is no set form for an investment strategy.
An SMSF trustee may create, regularly review and give effect to their own strategy, provided it takes into account the SMSF's circumstances, including:
- the risk involved in making, holding and realising, and the likely return from, the fund's investments, having regard to its objectives and expected cash flow requirements;
- the composition of the fund's investments as a whole, including the extent to which they are diverse or involve exposure of the entity to risks from inadequate diversification;
- the liquidity of the fund's investments, having regard to its expected cash flow requirements;
- whether reliable valuation information is available in relation to the investments covered by the strategy;
- the ability of the fund to discharge its existing and prospective liabilities;
- the expected tax consequences for the fund in relation to the investments covered by the strategy;
- the costs that might be incurred by the fund in relation to the investments covered by the strategy;
- whether the trustee should hold a contract of insurance covering one or more of the fund's members; and
- any other relevant matters.
The trustees should ensure that they take the above factors into account when formulating the investment strategy, when making investment decisions and when re-evaluating the investment strategy and investment portfolio and should record its consideration of the factors in a set of minutes.
SMSF trustees will also need to:
- ensure that their investments do not contravene superannuation law – such as restrictions on investing in, giving loans to and entering leases and lease arrangements with related parties (so-called 'in house assets'); and
- be aware of their obligations as trustee — such as to make and maintain investment decisions on an arm's-length basis.
You should obtain professional advice about your investment strategy. You may wish to have a professional advisor prepare your investment strategy for you – but the trustee remains responsible for managing the SMSF's investments in accordance with superannuation law and the SMSF's trust deed.
Does an SMSF trustee have to insure the members?
You will need to check your SMSF's investment strategy and trust deed about any requirements to insure the members.
Under superannuation law, an SMSF's investment strategy must address whether the trustee should hold a contract of insurance that provides insurance cover for one or more members of the fund. Read more about investment strategieshere.
If your SMSF has a Cleardocs trust deed: There is no general obligation to insure the members. The trustee may (or may not) insure the members as they see fit — with one or more insurance policies, with one or more insurers, by group or individual policies.
The exception to this is when the trustee informs a member that it will arrange for a particular kind of insurance, and the member or beneficiary does not ask the trustee not to.
If your SMSF does not have a Cleardocs trust deed: You will need to review the terms of your trust deed to determine whether (and in what circumstances) the trustee has to insure the members.
What is the role of an SMSF administrator?
An SMSF administrator is a person or organisation who administers the fund on behalf of the trustee, performing many of the administrative tasks the trustee is required to under superannuation law.
There is no fixed role for an SMSF administrator — it will depend on the skills of the administrator and the scope of their appointment.
At a minimum, an SMSF administrator is likely to prepare financial statements and tax returns for the SMSF, arrange for audits and keep records. An SMSF administrator may also provide financial advice or be involved in formulating the fund's investment strategy.
If you wish to appoint an administrator, you will need to check just what exactly they will do — and not do — for the SMSF. The trustee may also need to retain other professionals, such as an accountant and an auditor (which is required for every SMSF).
When can an SMSF appoint an administrator?
SMSF trustees may appoint an administrator whenever they like — provided they comply with the terms of the trust deed. The Cleardocs SMSF deed allows a trustee to appoint an administrator.
If appointing an administrator, you should check the date from which they are to assume administration of the fund — and make sure that the trustee has discharged all their record-keeping and disclosure obligations prior the administrator assuming administration of the SMSF.
Who can act as an SMSF administrator?
There is no restriction on who can act as an SMSF administrator.
Under superannuation law, it is the trustee who is responsible for the management of the fund, and it is the trustee who is responsible if the fund is non-compliant. The trustee must therefore be careful in appointing an SMSF administrator.
Who can audit an SMSF?
Only an 'approved auditor' under superannuation law can audit an SMSF.
From 1 July 2013, approved auditors must be registered with ASIC and will have an SMSF auditor number (referred to as a 'SAN'). To qualify for registration, the auditor must satisfy a range of requirements, including minimum education and experience qualifications, passing a competency test and being a fit and proper person. They must also reside in Australia.
ASIC maintains a public register of approved SMSF auditors, which you can search here.
ASIC also maintains a public register of banned and disqualified SMSF auditors, which you can search here.
What financial statements must be prepared for SMSFs?
Under superannuation law, the trustee must ensure that the following are prepared for the SMSF for each year of income:
- a statement of financial position;
- an operating statement; and
- any other account or statement required by superannuation law.
The trustee must keep these statements for 5 years.
SMSFs must report to the ATO each year using the ATO's SMSF annual return form for that financial year. This is available here.
You should obtain advice from your accountant or tax agent about what financial records an SMSF must keep.
Who can prepare financial statements for an SMSF?
Under superannuation law, SMSF trustees are required to ensure that the statements are prepared — they are not required to prepare the statements themselves.
The statements can be prepared by:
- an accountant;
- an SMSF administrator; or
- the trustee.
Do the financial statements for an SMSF need to be audited?
Yes, superannuation law requires trustees to ensure that the SMSF's accounts are audited by an approved auditor. It is an offence for any trustee to fail to do so. Read more about SMSF auditors here.
What is a reserve?
Reserves are those assets in an SMSF which are not allocated to any of the member's accounts. Any amounts held in reserve do not form part of a member's benefit when (or if) they are credited or allocated to that member.
If you would like to know more about reserves, see our articles:
- 'Understanding – Contributions, Contributions Caps and Reserves'; and
- 'Maintain some SMSF Reserves — Understanding how reserves can benefit your Self Managed Superannuation Fund'.
When can a trustee create and use reserves?
Under superannuation law, SMSF trustees are allowed to maintain reserves unless the SMSF's governing rules (that is, the trust deed) prohibits it. You will therefore need to check your SMSF trust deed.
If your SMSF has a Cleardocs trust deed: Cleardocs trust deeds allow reserves — trustees may establish or maintain reserves as the trustee thinks necessary or desirable or as required or permitted by law. The trustee may use the reserves for any purpose permitted by law and may credit or debit amounts from such accounts or reserves as the trustee sees fit.
If your SMSF does not have a Cleardocs trust deed: You will need to review the terms of your trust deed to check whether reserves are permitted or prohibited. You should obtain professional advice about whether your SMSF allows for reserves.
What kind of reserves are there?
Superannuation law does not provide for particular types of reserves. You will need to check your SMSF trust deed to see whether there are any restrictions on the kind of reserves a trustee may maintain.
Common types of reserves are discussed in our article here. These include:
- General reserve accounts: Used to allocate the SMSF's investment earnings. The trustee can then distribute these earnings for any number of purposes (for example, making superannuation benefit payments to members).
- Expense reserves: Used to set aside amounts for paying the SMSF's general and specific expenses.
- Contributions reserves: Used to 'warehouse' contributions for up to 28 days after the end of the month in which the contributions were made. A trustee may be able to use or contribute to the reserve to defer and reduce the impact of superannuation contributions surcharge tax.
- Investment reserves: Used to hold undistributed investment earnings. The trustee may wish to use an investment reserve to ensure that members of the SMSF receive consistent returns over a period of time.
- Anti-detriment reserves: Used to accommodate a bonus or additional payment from the SMSF to a dependant of a deceased member or the deceased member's legal estate. The payment is designed to compensate the recipient for any contributions tax paid by the deceased member.
You should obtain professional advice on the kind of reserves available to your SMSF.
Why does an SMSF create and use reserves?
Superannuation law does not set out any particular purpose for reserves. You should check the SMSF trust deed as this may restrict the reasons for which reserves may be maintained and used.
Common reasons for creating and using reserves include:
- Warehousing: Contributions reserves can be used to 'warehouse' contributions for up to 28 days after the end of the month in which the contributions were made. This allows the trustee to time payments towards the end of a financial year and allocate these to members' accounts to take advantage of tax deductions. You can read more information on this in our article here.
- Investment smoothing: Investment reserves can be used to hold undistributed investment earnings. If investment returns are below a desired rate of return, trustees can allocate the investment reserves to members' accounts to top these up to meet the required rate. If the investment returns are higher, the trustee may hold some or all of these in reserves to be allocated in future financial years when returns are lower. This allows a trustee to 'smooth' the rate of return for members.
- Self-insurance: As an alternate to taking out insurance, the reserves could be used to fund payments to members in the event of permanent or temporary incapacity. Read more about insurance of SMSF members here.
- Anti-detriment: Anti-detriment reserves can be used to pay a bonus or additional payment from the SMSF to a dependant of a deceased member or the deceased member's legal estate — the reserve can be built up over time to make the payment when required.
These are just some examples of uses for reserves. You should obtain financial or legal advice about the range of uses for reserves and which would be suitable for your SMSF.
How should reserves of an SMSF be managed?
Under superannuation law, if an SMSF maintains reserves, its governing rules (the trust deed) must contain a covenant by each trustee to formulate and to give effect to a strategy for their prudential management, consistent with:
- the SMSF's investment strategy; and
- the SMSF's capacity to discharge its liabilities (whether actual or contingent) as and when they fall due.
The trustee must formulate, review and give effect to a strategy for the management of reserves. This could be a single strategy for all reserves, or separate strategies for each type of reserve.
Superannuation law provides a defence for a trustee to an action for loss or damage suffered by a person as a result of how the trustee managed a reserve – if the trustee establishes that the management of the reserve was in accordance with the covenant described above.
When can an SMSF be wound up?
You will need to check your SMSF trust deed. SMSF trustees can generally wind up a fund whenever they wish to do so. If your fund has an employer-sponsor, they may be able to direct the trustee to wind up the fund.
Common reasons for winding-up an SMSF include when:
- there are no assets left in the fund;
- the fund has no members;
- the fund is no longer able to comply with superannuation law (for example, the trustee and members wish to move permanently overseas); and/or
- the members' circumstances have changed (for example, matrimonial splits).
How is an SMSF wound up?
The process for winding-up an SMSF is governed by superannuation law and the fund's trust deed. You will need to review the trust deed to check what is required.
Generally, the process for winding-up an SMSF is as follows:
- The trustee resolves to wind up the SMSF in accordance with the fund's trust deed.
- The trustee notifies each member and employer of the winding-up.
- The trustee ensures all activity statements are up to date, and all financial statements and accounts are prepared.
- The trustee deals with all assets and member contributions as required by superannuation law and the fund's trust deed.
- The trustee arranges for an audit to be conducted by the fund's auditor for the final income year of the fund.
- The trustee arranges for the fund's final SMSF annual return to be prepared and lodged.
- The trustee ensures that all tax lodgment and payment obligations are met.
- The trustee notifies the ATO in writing within 28 days of the SMSF being wound up.
What must the trustee do with members' benefits when the SMSF is wound up?
This is governed both by superannuation law and the fund's trust deed. You will need to review the trust deed to check what is required.
As part of the winding-up of the SMSF, the trustee will need to either:
- pay the benefits to any member who meets a 'condition of release' allowing them to access their benefits; or
- if the member does not meet a 'condition of release', or does not wish to access their benefits, roll the benefits over to another complying superannuation fund.
Conditions of release are events which allow members to withdraw benefits from their SMSF. These are also subject to the fund's trust deed. The most common conditions of release are a person retiring or turning 65.
The ATO has published a useful table — available here – setting out the relevant forms which the trustee must complete and lodge in relation to members' benefits on winding-up.
Do I need a Director Identification Number?
It is a requirement of law that directors now hold a Director Identification Number. If the product you are purchasing involves the creation of a company, creation of a corporate trustee or the appointment of a new director, then each director of the company/corporate trustee will need to verify their identity by applying for a director identification number (Director ID). Directors will retain the same Director ID even if they cease being a director, become a director of another company, change names or move interstate or overseas. Directors will not need to apply again or renew their applications.
If a person is appointed as a director:
- between 1 November 2021 and 4 April 2022, they must apply for a Director ID within 28 days of appointment.
- from 5 April 2022, they must apply for a Director ID prior to appointment.
For information on how to set up your Director ID, visit: https://www.abrs.gov.au/director-identification-number/apply-director-identification-number.r information on how to set up your Director ID, visit: https://www.abrs.gov.au/director-identification-number/apply-director-identification-number.