Retirement
Who can be a member of an SMSF?
Setting up a self-managed super fund with friends or relatives? Here’s a quick look at the SMSF membership qualification requirements to determine the eligibility of potential trustees.
Who can be a member of an SMSF?
Setting up a self-managed super fund with friends or relatives? Here’s a quick look at the SMSF membership qualification requirements to determine the eligibility of potential trustees.
Recently one of the largest Australia's super fund open it's door to all smsf member in providing aid in pooling their funds. This is one of the few reasons why people consider setting up their own SMSF since it allows it's trustees to be in full control over where in their retirement savings get invested.
The Australian Taxation Office (ATO), however, imposes strict regulations for fund compliance, including restrictions on who can be a member of an SMSF.
If you are setting up an SMSF or have been invited to join one, it is important to know whether you meet the eligibility requirements for trustees and members. Read on below to know whether you are qualified for an SMSF.
SMSF member qualifications
Trustees are wholly responsible for the financial, legal, and managerial duties required to run the fund and thus are fully liable for any breaches of regulation.
SMSFs can be a single-member fund or be composed of up to a maximum of 4 members: the actual number of people involved in the fund depends on how it is structured.
An individual SMSF structure can be a single-member fund but only if there are two trustees and the non-member trustee does not have an employer-employee relationship with the member. The only exception to the latter is when the non-member trustee is a relative of the member.
To be an SMSF member, they must:
- Willingly consent to become a member, trustee, or director of the fund
- Accept their responsibilities by signing the Trustee Declaration
- Be fully responsible for the fund
- Not have an employer-employee relationship with a fellow trustee/member, unless they are relatives
- Not be disqualified by SMSF regulators or the court
- Not be declared bankrupt
In terms of structure, an SMSF can have either a corporate trustee or individual trustees, but the basic qualification of members and trustees are the same.
Can a person with a legal disability qualify as a member?
A person with a legal disability may qualify as a member if they are over 18 years old and they are represented by a parent, guardian, or legal personal representative who:
- Must not be a disqualified person; and,
- Must act as a trustee or director on their behalf.
A trustee or member who suffers from a legal disability, such as mental incapacity, during their membership or lives overseas may also remain a member if they have a legal personal representative who can and will take over their duties for the fund.
Can minors be a member of an SMSF?
The law considers minors, individuals under 18 years old, as persons with legal disabilities. Minors are allowed to become members as long as they meet the conditions for legally disabled members listed above.
They are, however, disallowed from actually becoming a trustee or director until they reach 18 years of age but can still qualify as a member and consent to taking on the responsibilities of an SMSF trustee.
It is best to consult with an SMSF expert for advice before adding underaged members to an SMSF.
What conditions can disqualify a member?
There are instances wherein a person may be declared ineligible and the legal system (court) or SMSF regulators, such as the ATO, may play a big role in the disqualification.
The following situations would immediately disqualify potential or current SMSF members:
- Bankruptcy (individual trustee)
- Insolvency or being under administration (corporate trustee)
- Disqualification by appropriate regulatory bodies (ATO, Australian Securities and Investments Commission, etc.)
- Disqualified by the court
- Has been charged of dishonesty related offence(s)
- Has been found guilty of breaching super laws
In some cases, a disqualified person may be allowed re-apply to become an SMSF member by addressing all issues related to their disqualification.
Any trustee-member who becomes disqualified must immediately stop working as a trustee and notify the ATO about the situation. They may also nominate a legal representative, if necessary. Failure to do so may be deemed non-complying and all trustees, including the delinquent trustee, will be penalised.
This information has been sourced from the Australian Taxation Office and Nest Egg.
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