SMSFs

The key to owning SMSF assets

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While it might appear straightforward, attention to detail is the key to owning self-managed superannuation fund (SMSF) assets. With Regulation 4.09A of the Superannuation Industry (Supervision) Regulations 1994 now one of the most reported breaches to the Australian Taxation Office (ATO), understanding how clear title works is fundamental for SMSF compliance.

Requirements of Regulation 4.09A

Regulation 4.09A ensures that a superannuation fund's assets are kept separately from the members' personal or business assets:

SUPERANNUATION INDUSTRY (SUPERVISION) REGULATIONS 1994 - REG 4.09A

Operating standard--money and other assets to be kept separate (self managed superannuation funds)

(1) For subsection 31(1) of the Act, the standard stated in subregulation (2) applies to the operation of regulated superannuation funds.

(2) A trustee of a regulated superannuation fund that is a self managed superannuation fund must keep the money and other assets of the fund separate from any money and assets, respectively:

(a) that are held by the trustee personally; or

(b) that are money or assets, as the case may be, of a standard employersponsor, or an associate of a standard employer-sponsor, of the fund.

Furthermore, Australian Taxation Office Interpretative Decision ATO ID 2014/17 Superannuation. Keeping money and other assets separate from those of other parties (ATO ID 2014/7) clarifies that the principles of Regulation 4.09A apply to all types of assets, including shares, units in a trust and other property.

Part of that requirement is to protect fund assets by establishing clear ownership in the event of a dispute to avoid costly litigation.

SMSF assets cannot be held in the personal name of the member or trustee, regardless of whether the trustee is an individual or a director of a corporate trustee.

Alternatively, the audit report may be qualified, and an auditor contravention report (ACR) lodged with the ATO.

Correct title to assets

As an SMSF is a unit trust, it cannot hold fund assets directly. The purpose of the trustee is to hold the assets legally on behalf of the beneficiaries, who are the beneficial owners.

The naming convention for SMSF assets is as follows:

Corporate Trustee: ABC Pty Ltd ATF ABC Superannuation Fund

Individual Trustee: John White & Jane White ATF ABC Superannuation Fund

From an administrative point of view, it is much easier to have a corporate trustee which is another key to owning SMSF assets. The reason is that the appointment or resignation of a director of the corporate trustee does not require any changes made to the title.