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Time for self managed superannuation funds to put their assets in order

The trustees of self managed superannuation funds (SMSFs) must ensure that the fund's assets are appropriately recorded as being held on trust for the beneficiaries of the SMSF.

In certain states, the legislation may prevent trustees from holding assets using the fund's name in the title. This may include the trustee for the superfund as the asset owner (i.e. John Smith as trustee for John Smith Super Fund). Where this is the case, a caveat, instrument or declaration of trust must be executed for the asset. Trustees that have fund assets in the trustee's own name must also execute a caveat, instrument of declaration of trust for the relevant asset.

If this rule is breached, fund trustees are expected to rectify the breach as soon as is reasonably possible.

The tax office recognises, however, that certain types of breaches can take longer to rectify than others.

For this reason, where an approved auditor or actuary reports to the tax office this year that a fund's assets are not appropriately recorded, they will not take immediate investigative action against the fund. Nevertheless, trustees must take immediate steps towards rectifying the breach.

WARNING: Should the breach be reported or identified again in the next year, SMSF trustees will come under Tax Office scrutiny.

It is especially important that auditors report these contraventions on time to avoid any additional delay in rectifying the breach.

What about other contraventions?

The above arrangements do not apply for other breaches of the Superannuation Industry (Supervision) Act 1993.

More information

For more information on putting assets in your fund's name see DIY super - It's your money...but not yet! . This article also explains the tax office position on compliance and the consequences of non-compliance, including what will happen if you do not rectify breaches satisfactorily.

Copyright Commonwealth of Australia, 28 April, 2005.

This article is not a substitute for independent professional advice. We do not warrant the accuracy, completeness or adequacy of the information or material in this article. All information is subject to change without notice. We and each party providing material displayed in this article disclaim liability to all persons or organisations in relation to any action(s) taken on the basis of currency or accuracy of the information or material, or any loss or damage suffered in connection with that information or material. You should make your own enquiries before entering into any transaction on the basis of the information or material in this article. Please ensure you contact us to discuss your particular circumstances and how the information provided applies to your situation.

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