Getting a super education for SMSF trustees

New rules are expected to come into force on July 1 that will compel SMSF trustees who break super laws to undertake mandatory education. So exactly what do you need to know to run a super fund and where do you go to get this information?

Sinclair Taylor, head of SMSF trustee distribution at Westpac, says being an SMSF trustee is a big responsibility and requires a trustee’s time, skill and effort for the trust to be managed efficiently.

“The amount of time the average trustee spends on managing the fund has been estimated at around four hours, or half a day, each week. Typically this can involve investment research, meetings with advisers and auditors, as well as other trustees, or catching up on new regulations,” he says.

Taylor says it is important those looking to establish an SMSF consider the following questions: Do I have the required investment knowledge, time and skills to make the right investment decisions? Do I have the attention to detail required to satisfy the strict ATO compliance regulations? Am I willing to seek professional financial advice to formulate my initial written investment strategy, in terms of risk, diversification, liquidity, solvency and insurance? Do I have enough money in super (recommended to be at least $200,000) to justify an SMSF?

According to Taylor, keeping abreast of the latest industry news and information is critical for an SMSF trustee to stay on top of regulatory changes impacting superannuation, new investment options and the value of assets in the fund.

“Revisiting your own risk profiles and retirement goals on a regular basis is also important to ensure your fund is doing what it needs to do. A regular review – which means at least annually – of your SMSF’s investment strategy is now also required by law,” he adds.

Gadens Lawyers partner Kathleen Conroy says a good starting point is the ATO website when it comes to acquiring the right knowledge to run a fund.

“It has a number of publications on self-managed super funds, including those on setting up a fund and running a fund,” she explains.

Nathan McCullum, principal of financial planning firm McCullum Financial, says an accountant is typically the main person from whom SMSF trustees will seek advice.

“Most accountants have a broad range of knowledge and have to keep up to date with a variety of taxation laws. But in many instances they might not have specialist SMSF knowledge which trustees will need to get the most out of their SMSF,” he says.

McCullum says an experienced financial planner can assist SMSF trustees to achieve their investment goals.

“In my experience working with a large number of SMSFs, I would say that in general those SMSFs that use financial planners achieve higher and more consistent investment returns compared to those who do everything themselves.

“SMSF trustees need to realise control of investment and using specialist professional investment advice are not mutually exclusive activities,” he says.

Conroy says making sure you understand the rules is critical given the new education rules for SMSF trustees, due to come into effect on 1 July.

“These rules came out of the super system review and are part of a group of reforms designed to strengthen the ability of the ATO to deal appropriately with fund trustees who have breached superannuation law,” she explains.

It is anticipated the mandatory education option – or, more formally, an “education direction” – will be used when the ATO identifies contraventions of the SMSF rules by a trustee stemming from ignorance or a lack of proper understanding of the trustee’s obligations or superannuation law.

According to Conroy, SMSF trustees the ATO identifies as requiring further education will receive a written direction and will need to complete an education course within a specified period of time.

“The trustee will need to provide evidence of having completed the course. As for the education service providers, the courses they provide will need to be approved and they will not be permitted to charge a fee to a trustee who is taking a course at the direction of the ATO,” she says.

Conroy says a trustee can object to an ATO direction to undertake education. “But this aside, failure to meet the terms of an education direction will be an offence,” she warns.

The education direction is part of new laws that still need to be passed through Parliament.

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