New Changes for Self Managed Superannuation Trustees

Peter Cramer

There have been a couple of changes made to responsibilities and obligations imposed on SMSF Trustees kicking off effectively 7th of August and these are now Law. Let’s have a look at them.

Trustees must consider insurance for Fund members as part of the Investment Strategy for an SMSF

I think this is a good concept and I have no problem with this being made a legal requirement. I believe the concept of insurance is an ongoing important aspect for every family to consider and is no less important for those with their own SMSF. There are a couple of tax issue that can come into play where insurance is held through a Superannuation Fund but generally this is not a big deal and generally speaking is a great idea!

Speaking of insurance, another tip I would give you is that you look at taking out a policy as early as possible, particularly when you are fit! The younger you are and the fitter you are the cheaper the insurance is and once you have it in place (and provided you keep paying the premiums) then as you get older, less fit and not so healthy, you will continue to retain your insurance and be covered when in fact you need it. I see too many situations where people leave the question of insurance far too late and when they go to apply they are either too ill, too unfit or have some injury so they can’t get the cover that they then desperately need. Don’t kid yourself, get your cover when you don’t think you need it so that you’ll have it when you do!

Assets inside a SMSF must be recorded at market value

No big deal here as we have always recorded the assets in a Superannuation Fund at market value and has always been regarded as “best practice”. It makes sense that they should be recorded at market value because many of the calculations do hinge upon the values of the assets anyway. So again, no problem with this change and it’s a sensible one.

There is a requirement to conduct a review of the Fund’s Investment Strategy on a regular basis

Again, this is common sense and again I don’t have a problem with this. One of the beauties of having your own SMSF is the total control Trustees have and they are of course making their investment decisions on an ongoing basis, a big advantage is that they are able to change their mind and take quick actions as they see fit whereas in a large Fund it can be a bit like trying to turn around a battleship, takes a lot of time to do anything major.

The other point of course in a SMSF is the Trustees are already aware of exactly what the assets of the Fund are so again no problem here. The only issue I see of significance is what levels of evidence the ATO will require to prove this is happening? It probably means that the Trustees are going to have to document evidence of their ongoing review in the form of a minute, this can be as simple as the Trustees scribbling down notes of their decisions from time to time. I think a formal minute at least once a year would be sufficient.

Speaking of asset management, this brings me to another philosophy of mine – I would encourage all people who wish to create wealth and be successful at it to keep a record of their own personal asset and debt summary and do so on a monthly basis.

I recommend that you set up something like an excel spreadsheet and list all your assets and debts down the page and then each month record the monthly asset and debt levels with subtotals and then over a period of time you can see how you are tracking.

Without doubt, those that do this regularly and properly have a far greater chance of achieving their goals then those that think about this on an annual basis or only hope and wish that they are creating wealth!

Going one step further, I recommend that you run some simple percentage calculations and equity calculations to provide a bit more meaningful information.

I am more than happy to email out a proforma of such a spreadsheet to get you going if you think it might help.

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