Awareness is needed of the Superannuation Industry (Supervision) (SIS) Act covenants imposing certain responsibilities on SMSF trustees even if they are not specifically stated in the fund trust deed, a sector specialist has said.
Accurium head of SMSF education Mark Ellem acknowledged section 52B of the SIS Act stipulates trustees must act honestly in all matters relating to a fund, exercise care, skill and diligence like a prudential person managing someone else’s money, act in the best financial interests of the beneficiaries when performing duties and exercising powers, and avoid any actions or contracts that hinder the proper performance of trustee duties.
Further, Ellem noted section 52B also imposed the obligations of developing and regularly reviewing the investment strategy, considering risks, returns, diversification, liquidity and the SMSF’s ability to meet liabilities, managing any reserves prudently in line with the investment strategy and liability obligations, and providing beneficiaries with access to any prescribed documents or information.
He pointed out SMSF trustees are held to these covenant responsibilities regardless of whether they are addressed in the fund’s trust deed.
“So section 52B [of the SIS Act] says if [these obligations] are not in the deed, [effectively] they are in the deed and you must follow them,” he told attendees of a technical webinar last week.
Business Depot director Neil Dallas said the covenants are an instruction to trustees not to act in their own self-interests and recognised it is critical if individuals want to avoid disputes among members.
“One of the things to remember is disputes generally arise out of self-interest, but the problem for trustees is they are not supposed to be self-interested,” Dallas confirmed.
“So if you and I are both trustees of the fund, and we’re both members, I am not there just to represent Neil, I am there to look after the fund for the benefit of both of us as are you.
“If we have a dispute about something, and it suits me to run [the fund] in a particular way because that affects my account balance to the detriment of yours, that’s not a good outcome.
“[So if] you’re sitting here as a trustee making decisions, be very careful about focusing on your own self-interest [because] that’s not what you are supposed to be doing. You’re supposed to be acting on the interests of all of the members of the fund.”
