A Guide to ATO Trustee Declaration for a SMSF

From 1 July 2007 each new individual trustee or each new director of a company acting as trustee of a self-managed superannuation fund (SMSF) is required to sign an ATO Trustee Declaration to declare they understand their obligations.

The purpose of the declaration is primarily for a trustee’s education to ensure they understand what their role is and what their responsibilities are in relation to managing a SMSF. However, administrative penalties can be imposed if a declaration is not made or not provided to the ATO on request.

What is an ATO Trustee Declaration for SMSFs?

The trustee must complete and sign the declaration.  The SMSF trustees or directors of the corporate trustee are acknowledging they understand their obligations and responsibilities in accordance with the Superannuation Legislation and Regulations which a brief explanation is included in the declaration:

• sole purpose test is maintained to provide retirement benefits to members or their beneficiaries if they die before retirement
• trustee duties
• accepting contributions and benefits
• investment restrictions
• administration of the fund

Every trustee is also acknowledging that the trust deed must be kept up to date and the types of penalties that can be imposed by the Australian Taxation Office (ATO). if the trustee does not comply with the super legislation.

The ATO declaration is available on the ATO website and is required to be completed and signed within 21 days of becoming a trustee or director. The trustee also acknowledges the following:

• the declaration is retained for at least 10 years or whilst remaining a trustee, if longer than 10 years
• administrative penalties can be imposed for non-compliance to sign the declaration within the 21-day timeframe
• the declaration must be available for the ATO’s inspection or penalties may apply
• a SMSF trustee does not have access to the government’s financial assistance program in the case of financial loss due to fraud or theft
• the information declared is true and correct

Hint – the trustee’s signature must be witnessed by another person (over 18). A trustee who has undertaken a course of education required by the ATO in relation to a breach of the SIS rules must sign a new ATO declaration. A new ATO SMSF trustee declaration is required to be signed by a legal personal representative stepping into the shoes of a member to act as a trustee when a member is deceased, a member is under a legal disability (usually a child under the age of 18) and in relation to holding an enduring power of attorney for a member.

Importance of Completing and Abiding by the SMSF Trustee Declaration

Many trustees merely sign this declaration as part of establishing the fund. However, it is an important document which should be carefully scrutinised and understood. There is a lot of crucial information contained in the declaration, and it would be difficult for the trustee to claim ignorance if a breach occurs.

In 2022 a Supreme Court case of New South Wales of Jenifer Helen Papadam v Smidam Pty Limited highlighted the issues of not abiding by the obligations and responsibilities outlined in the ATO declaration. The case involved a SMSF with several years of outstanding financial statements and tax returns with disputing trustees who could not work together. An independent SMSF auditor was appointed by the court to formulate a rectification plan to ensure the SMSF compliance with the SIS laws. This auditor found the SMSF trustees did not abide by their duties and responsibilities as required by the ATO declaration. The investment strategy was out of date, there were no minutes and insufficient information to prepare accurate financial statements. Mr Saul advised the fund should be wound up and the member benefits be transferred into an alternative complying fund. The self-managed super fund was eventually wound up by the receiver.

What are the Responsibilities of a Corporate Trustee or an Individual Trustee?

• Act in the best Interests of members
• Manage the operations of the SMSF
• Complete the ATO Trustee Declaration Form
• Comply with the Superannuation Industry (Supervision) Act 1993 and regulations such as:
• Ensure assets are kept separate
• Adhere to contribution and benefit payment rules
• In-house asset rules
• Related party transactions are made at arm’s length
• Valuation of fund assets
• Formulate and implement an investment strategy
• Maintain proper financial records and statements
• Retain records including trustee declarations
• Appoint an approved SMSF auditor
• Lodge a SMSF Tax return
• Pay the fund’s tax liability and ATO supervisory levy
• Review if suitable insurance is required for the members
• Notify the ATO of changes to the fund’s structure such as
• change of trustees or directors of a corporate trustee
• if a member changes their name when they get married
• Review the SMSF trust deed
• Ensure Ongoing Compliance as an SMSF Trustee

Superannuation Trust Deed Review

A trustee acknowledges the fund must keep the trust deed up to date in accordance with the law and the needs of the members. It is crucial that a SMSF trustee is aware of what the trust deed says. The trust deed governs what the SMSF trustee can or cannot do and may limit what is allowed under the SIS laws and regulations.

Key Takeaways

• an ATO trustee declaration must be signed within 21 days on the appointment of a new trustee or corporate trustee director
• a new trustee must understand their responsibilities and obligations as required under the superannuation laws and regulations