The importance of keeping your SMSF and
personal affairs separate
As trustee of your self managed superannuation fund (SMSF), it is important you keep your SMSF and personal affairs
separate. In theory, making this distinction sounds easy, but in practice the line can easily become blurred.
Understanding the basics can help you manage your obligations and keep your fund’s auditor and the Australian
Taxation Office (ATO) happy.
The requirement to separate assets
Superannuation legislation requires trustees of an SMSF to keep money and other assets of the fund separate from all
personal money and assets belonging to the trustees.
In practical terms, this means your super fund should operate its own bank account and make all investments in the
name of the fund. Further, all income and expenses relating to your self managed super fund should be managed
directly through your fund’s bank account and not through personal accounts.
Naming of assets
You must ensure you adhere to the correct naming conventions when dealing with fund assets. As your self managed
super fund is a trust and not a separate legal entity, all assets must be registered in the trustee’s name on behalf of
your fund. Accordingly, if your fund has individual trustees all assets should be named in the following format:
Jim Doe and Jean Doe as Trustees for the J & J Doe Superannuation Fund.
Funds with a corporate trustee must abide by similar conventions, with all assets required to be held by the company
in trust for the SMSF. In this case your fund's assets should be named in the following manner:
J Doe Pty Ltd as Trustee for the J & J Doe Superannuation Fund.
When establishing a new SMSF account or purchasing a new asset, it is your responsibility to make sure the provider
sets up the account in the appropriate name. Too often providers are not familiar with the ‘trust’ relationship and will
incorrectly set up new accounts/assets in either the name of the trustee(s) or SMSF alone.
Paying expenses from the fund
All expenses relating to your SMSF must be paid directly from your fund’s bank account. If for some reason you do
happen to pay a fund expense from your personal account, you should seek reimbursement for this expense
immediately or the amount will be treated as a contribution to the fund.
For example, assume the J & J Doe Superannuation Fund has just received an annual rates notice for $3,200 in respect
of the fund’s investment property. As the fund does not have sufficient cash, Jean (a trustee and member) pays this
from her personal account. If Jean does not seek immediate reimbursement, she will be taken to have made a $3,200
_____________________________________________________________________________________________________________________
PO Box 893 St Ives NSW 2075 Ph: 02 9487 8200 Fax: 02 9487 8201 Email: [email protected] ABN 7049 090 2616
Life Strategies Financial Services is a Corporate Authorised Representative No. 298686 of Financial Planning Services Australia Pty Ltd AFSL
Licence No. 225982 ABN: 5501 052 1810 www.fpsa.com.au
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contribution. Should Jean have already utilised her non-concessional contributions cap, this will lead to excess
contributions tax of $1,488.
In the reverse, allowing your fund to pay personal expenses of a member is particularly problematic. Consider the
following example:
The premium for renewal of John’s personal insurance is due. As John has no available cash, he pays the premium from
his SMSF’s bank account. If John has not met a condition of release allowing him to legitimately access his super
benefits, the SMSF will have put its complying status at risk while the trustee(s) may be subject to personal penalties.
Banking income into personal accounts
All income generated by your fund’s assets must be paid directly to your SMSF. If SMSF income is deposited directly
into your personal bank account in preference to the SMSF’s bank account, you must immediately repay the money
and contact the registry or fund manager to update your payment instructions.
For example, assume a dividend of $5,000 in respect of shares held by the J & J Doe Superannuation Fund is
inadvertently paid into Jean’s bank account. Jean must immediately pass this money to her fund or the fund may risk
breaching the rule against providing financial assistance to members or even be seen to have provided Jean with early
access to her super benefits.
Consequences of getting it wrong
While the above distinctions may seem insignificant, the consequences of getting it wrong can be severe.
First, if you fail to separate personal and fund assets your auditor will have to report it to both the trustees and ATO.
For example, a breach of your obligation to hold assets in the right name contravenes a specific provision of the super
legislation and may necessitate the lodgement of an Auditor Contravention Report with the ATO.
Second, where assets are not clearly separated, your superannuation assets are potentially vulnerable to seizure
should you become bankrupt or in the event of divorce. Take, for example, a trading company that also serves as
trustee of a SMSF. If the company runs into financial trouble in connection with its trading activities, business creditors
will inevitably pursue the company. If the ownership of fund assets is not properly documented, it may not be clear
which assets relate to the business and which relate to the fund, and this may put the superannuation assets at risk.
When it comes to keeping your SMSF and personal affairs separate, the key is to keep appropriate records and pay
attention to detail. Seeking advice from appropriately qualified SMSF specialists may also help keep your SMSF on the
straight and narrow.
This content is general in nature and has been prepared for information purposes only and does not constitute any specific
recommendations. It has not taken into account your objectives, financial situation or needs and you must therefore assess
whether it is appropriate, in the light of your own individual objectives, financial situation or needs, to act upon this content. We
recommend that you obtain financial, legal and taxation advice before making any financial investment decision.
You should refer to the Financial Planning Services (Australia) Pty Ltd/ Life Strategies Financial Services Financial Services Guide
(FSG) in relation to any financial service provided to you.
LAST UPDATED SEPTEMBER 2013
_____________________________________________________________________________________________________________________
PO Box 893 St Ives NSW 2075 Ph: 02 9487 8200 Fax: 02 9487 8201 Email: [email protected] ABN 7049 090 2616
Life Strategies Financial Services is a Corporate Authorised Representative No. 298686 of Financial Planning Services Australia Pty Ltd AFSL
Licence No. 225982 ABN: 5501 052 1810 www.fpsa.com.au
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