Educating all members of an SMSF
Tips for trustees to ensure all members of their SMSF are fully engaged.
When you have a SMSF it’s essential for all the members of the fund to be fully educated about how it operates. While this sounds self-evident, it’s very easy for the fund to become the pet project of one member, and for an additional member to become disengaged with the trust and its purpose. To avoid this, there are many steps trustees can take to ensure all members are fully engaged with the SMSF.
While running an SMSF takes time and energy, almost anyone can run one if they are prepared to put in the required effort learning about how to administer it. It’s also important to understand the rules and regulations that govern SMSF funds and keep abreast of what’s happening in investment markets.
David Palermo, certified financial planner, Capital Wealth Group, says the first port of call when learning about how to run an SMSF is the Australian Taxation Office’s (ATO’s) website.
“There’s a great in-depth, online information tool kit that is updated regularly. In particular, a document called Running a self-managed super fund, that outlines the roles and responsibilities of an SMSF trustee that members may find informative,” he explains.
The ATO’s site is also a great resource for keeping on top of the frequent regulatory changes that affect SMSFs. Palermo says it’s also worth working with an adviser who is a member of a relevant professional body to help build your knowledge over time.
The accounting body CPA Australia and Chartered Accountants Australia and New Zealand (CAANZ) also have a great educational resource for SMSF members. The Self-Managed Super Fund Trustee Education Tool is full of up-to-date information about the best way to run an SMSF and should be required reading for all trustees that want to run their fund in the best way possible. It covers the roles and responsibilities of a trustee, investment restrictions imposed on SMSF trustees, as well as administrative responsibilities.
The ATO has endorsed the course. Participants complete a quiz at the end of it and if they are successful, receive a certificate of attainment.
The SMSF Association also has lots of information about how to run an SMSF, including information about how to benchmark the fund’s performance, and insight papers that are stored in its knowledge centre to help SMSF trustees build their knowledge base.
When it comes to making sure all members have the required knowledge of financial markets, Palermo says it’s important to look for impartial information sources.
“There's a lot of data members can find online, but it's not always going to be the best information. Often the information that’s published online is just someone’s view or opinion, or it might come from a business with a vested interest that is selling a financial product. You want impartial information,” he advises.
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As for ensuring everyone in the fund knows the administrative responsibilities associated with running it, Palermo says he advises his clients to draft an ‘in case of emergency’ or ICE sheet. This should be attached to the front of the SMSF’s documentation. It should list contact information for the fund, investments it’s currently holding and any other critical information such as bank account numbers.
“It means that the fund can still operate, even if the member who takes most responsibility for the fund dies. It’s important all members sit down regularly and discuss the assets held in the fund, how it’s run and what's required, and document it all,” he adds.
Often, SMSFs are run by a husband and wife as trustees and members and it can be a great idea to work together on the fund as a shared interest. That way each member is fully informed about their obligations and how the fund is run.
Opening a SMSF is a great way to build wealth and generate an income in retirement. But it requires focus from all members to ensure the fund meets its obligations and ensures members have an income in retirement.
This is why it’s so important for members to ensure they are fully educated about it. So make sure you and your fellow trustees are across all the relevant information to ensure you run the fund in the best way possible.