Why your personal and SMSF assets should be kept separate

One of the biggest principles of running your own self-managed super fund is to keep the assets of the SMSF separate from other personal or business assets you might own. This might seem like common sense, but it can seem quite strange to think of the cash and other assets as not your own, especially when you’re the one managing it.

How do you manage this on a day to day basis?

  1. The SMSF should operate its own bank account/s, separate from personal or business accounts.
  2. The fund’s income should come into a SMSF bank account, and similarly the super fund’s expenses should be paid from this account as well.
  3. The SMSF’s assets, which can include shares and share trading accounts, bonds, property, artwork, as well as cash, should be held in the name of the trustee, in trust for the SMSF. For example, accounts opened in the name of the fund should be either:
    • Trustee Company Pty Ltd as trustee for The Family Superannuation Fund, OR
    • Individual Trustee 1 and Individual Trustee 2 as trustees for The Family Superannuation Fund

In the case of some assets, property in particular, you cannot actually register the asset in the name of a trust. In this circumstance, it would be best to sign a statutory declaration which states that the asset is held in trust for the super fund.

What happens if you get it wrong? The consequences of not keeping your SMSF assets separate from other personal and business assets can involve a contravention of law. It can result in a qualified audit report, and these compliance breaches are then reported by the auditor to the ATO.

Furthermore, not keeping SMSF assets separate can put them at risk in the event that the trustee is involved in financial trouble. If it is not clearly documented that the asset belongs to an SMSF as opposed to the trustee, it may be subject to seizure by creditors.

Recent changes in super regulations have given the ATO more power to enforce this requirement, so remember to pay attention to detail and communicate with your SMSF administrator or accountant if you’re unsure.

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