Who Can’t be a SMSF Trustee

Posted in Wealth
30/05/2014 Level One

Did you know that if you are an undischarged bankrupt or have been convicted of a crime of dishonesty (e.g. fraud, theft) that you can no longer be the trustee of a self-managed superannuation fund (SMSF)?

The super laws call undischarged bankrupts and those convicted of a crime involving dishonesty “disqualified persons”. These people can’t be SMSF trustees or members. In addition, they can’t appoint a legal personal representative to act for them. They either need to leave the SMSF or convert the fund into a small APRA fund.

Under normal rules, the trustees of a SMSF have to be members of the fund. If the trustee is a company then all the members must be directors of that company. There can be no other members or trustees.

There is a set of rules that apply for specific situations when someone can’t act for themselves. Two other examples of people who can’t act as trustees are children and people who are mentally incapacitated.

Young children can be members of a SMSF, but either their parent or a court-appointed guardian must be installed as the trustee on their behalf.

The super laws provide a small concession with regard to disqualified persons. Those convicted of dishonest crimes can apply to the tax office to have their crime ignored to allow them to continue to be a SMSF trustee. This can only occur if any prison term is less than two years or a small fine has been imposed. The ATO must receive your application within 14 days of a conviction date, however it can extend this in exceptional circumstances.

The bottom line is that SMSF trustees have a responsibility to act responsibly and ethically in their role as trustees. If you play it safe – you should have nothing to worry about.


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