Criticism is often directed towards SMSFs on the premise trustees are acting in a selfish and self-serving manner, but this perception ignores their obligations to serve all members of the fund, according to the SMSF Professionals’ Association of Australia (SPAA).
SMSFs were often attacked for employing poor asset allocation techniques, inadequate administration processes and an unreasonably high level of gearing on the basis trustees were only running the fund for themselves, but that type of denunciation failed to recognise the wider-ranging obligations they had to adhere to, SPAA technical and professional standards director Graeme Colley said.
“They are often told to take decisions that would put them at odds with their legal duties. All this simply demonstrates is the lack of knowledge of what trustees’ responsibilities entail,” Colley said.
The Superannuation Industry (Supervision) Act dictates trustees have to, among other things, act honestly in all matters concerning the fund, exercise their duties and powers in the interest of beneficiaries, and use the same degree of care, skill and diligence as an ordinary person would when charged with managing the property of another.
“There is a common misconception that trustees are somehow a ‘law unto themselves’, but nothing could be further from the truth. Their legal responsibilities are wide-ranging and onerous, and penalties apply if they don’t comply,” Colley said.
Other responsibilities of SMSF trustees include avoiding conflicts of interest, being impartial to beneficiaries, properly executing the terms of the trust deed, and defending the trust.
“In SPAA’s experience, trustees have largely accepted these responsibilities, showing a capacity to quickly adapt to any changes in the rules,” Colley said.
“Having set up their SMSFs to ensure they are self-sufficient in retirement, they understand better than anyone the importance of complying with the legislation to ensure the fund works to the benefit of all members.”
