Laws, rules and consequences of an SMSF

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.

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 of 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.

Check the residency of your fund

To be a complying super fund and receive tax concessions, your fund needs to be a resident regulated super fund at all times during the income year. This means your fund needs to meet the definition of an 'Australian superannuation fund' for tax purposes.

If your fund is a non-complying fund, its assets (less certain contributions) and its income are taxed at the highest marginal tax rate. If a member moves or travels overseas for an extended period, this may affect the residency status of the fund.