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Running an SMSF and What To Do To Maintain It

Running an SMSF and What To Do To Maintain It

What is required in running an SMSF?

Running an SMSF is a complex process. However, it can be simpler than how others describe it. It is recommended to take advice from professional SMSF advisors in the proper running of the fund, but it is still ultimately you, as a member or trustee of the SMSF, who needs to take responsibility for the success of your SMSF.

Here are some dos and don’ts that you should do as a trustee or when running an SMSF.

  • The SMSF should pass the sole purpose test which is to set up funds for your retirement or provide death benefits.
  • Plan an investment strategy which considers the circumstances of the SMSF this may include the risks of investments, returns, cash flow, and liquidity requirements. The strategy for running an SMSF should also include insurance for members and diversification of investments.
  • Separate personal assets from the SMSF assets, so that they are not mixed.
  • Comply with SMSF tax and superannuation laws for all contributions made to the fund and benefits paid to members.
  • Keep updated records about the SMSF and notify the Australian Taxation Office (ATO) of any important changes made to the fund.
  • Have an independent SMSF auditor audit the fund each year.
  • Lodge the annual return of the SMSF with the ATO.
  • Be informed about penalties that can result from breaching tax laws or superannuation laws.
  • Starting July 1, 2018, SMSFs should report events that affect the transfer balance of members.
  • Always follow the guidelines on superannuation investment to avoid breaking any rules in your SMSF investments.
  • Do not use the fund to give financial help to members or relatives. Do not lend money to them as well. Do not pay school fees of relatives or other related parties using SMSF assets.
  • Do not buy assets from related parties or fund members (except in some circumstances). A member of your SMSF cannot sell a residential property they own to the SMSF.
  • Do not borrow money (except in some limited and specific circumstances).
  • Do not hold more than 5% of the fund’s investments as ‘in-house assets’. In-house assets are loans to or investment in a related party of the fund or an asset released to a related party. This includes, investing in a company controlled by a member of the fund.
  • Do not sell fund assets or enter into investments on a non-arm’s length basis. An example would be, selling an asset to one of its members at a price below its true market value.

The smarter way to start than getting professional help is setting up and running an SMSF. Members and trustees should also come up with an investment strategy for the fund.

Things to do to maintain an effective SMSF

Maintaining an SMSF is either complicated or simple. Maintenance is highly dependent on how much help you get from professionals in running an SMSF. However, it does not matter how much help you outsource, as a trustee you are still solely responsible for the decisions made by the fund.

To comply with superannuation laws, there are activities you need to do every year to keep the fund compliant.

When running an SMSF, members or trustees must:

  • Lodge the SMSF annual return with the ATO. This includes tax and regulatory return that should be completed every year.
  • Pay the annual SMSF supervisory charge which is usually included in the Annual Return.
  • Make sure that fund assets are valued at current market prices to make the fund’s annual return and financial statements accurate.
  • Keep records of superannuation and tax laws, like actuarial certificates, trustee declarations and reports of events that affect transfer balance accounts.
  • Starting July 1, 2019, make sure that events that affect member’s transfer balance are reported to the Australian Taxation Office or ATO.
  • ATO must also be notified on any significant changes made to the fund. This includes having a new trustee or changes in contact details within 28 days of the change.
  • In making contributions to the fund, members and trustees should ensure that the fund is able and capable of accepting the contributions. Contributions need to be within the fund capped limit according to superannuation laws.
  • For SMSFs that are already paying pensions, make sure that you are paying the minimum annual pension payments to keep tax concessions on assets.
  • Aside from these specific activities which you have to do, you also need to meet investment rules all the time. Following investment rules will ensure that it will help you avoid making violations which can result in heavy penalties. Keeping the fund compliant and well into the direction that you want it to go to is very important in running an SMSF. These are vital in helping the fund reach its full potential and for members to reap the fruits of their labours once they retire.

Kingston Knight Audit are the Auditor Melbourne experts to contact when dealing with your trust account audit, SMSF Audit, financial statement audit,  and internal audit requirements. Contact us today, Kingston & Knight Audit offers a free telephone consultation to establish how we can best help you achieve the assurance and compliance you require.

Call our Melbourne team today on 03 9088 2242, or email us via