Clarification of “SMSF” Definition and Qualification on Trustee/Director Remuneration

15 December 2011

Recently introduced draft legislation will clarify the definition of “self managed superannuation fund” (SMSF) and also inserts a new qualification on trustee remuneration.

The clarification is to permit the parent or guardian to be a director of the corporate trustee of the SMSF where the member is under age 18 and the parent or guardian is not the legal personal representative of the member.  The clarification aligns the parent/guardian role with the situation which applies in the case of individual trustees of an SMSF and corrects a drafting oversight.

This clarification will apply from 8 October 1999 which is the date from which the “self managed superannuation fund” definition was originally inserted into the Superannuation Industry (Supervision) Act, 1993.

The draft legislation will also insert a new “section 17B” into the Superannuation Industry (Supervision) Act, 1993 to regulate trustee/director remuneration.  The provision will remove any doubt that a trustee (or a director of the corporate trustee) can be remunerated for non-trustee services they perform.

However, the individual trustee must:

  • be properly qualified to perform those services;
  • perform those services in the ordinary cause of business carried on by the trustee; and
  • not receive remuneration that is unreasonably favourable to the trustee.

A similar qualification will apply to directors of corporate trustees.

The critical issues to be considered before a trustee or a director can be remunerated for their non-trustee services are:

  • the trustee/director must be qualified to provide those services;
  • the trustee/director must be carrying on a business of providing those services to the public; and
  • the remuneration cannot be unreasonable.

Remuneration for non-trustee services is not to be a means of the early release of super benefits by the back-door.

An accountant in private practice could be remunerated for accounting services provided to the SMSF.  However, an accountant who is an employee could not.  Similarly, a solicitor in private practice could be remunerated for the legal services they provide but an employed solicitor could not.

Furthermore, the remuneration must only relate to the professional services they actually provide and are qualified to provide, ie a solicitor could be not remunerated for providing accounting services.

Finally the trustee/director must actually provide the services in order to be remunerated.

The new section 17B will apply from 8 October 1999 for individual trustees but will only apply from the 2007-08 financial year for directors.  The reason for the different commencement dates is simply that remuneration for directors for the provision of non-trustee services was first permitted only in respect of the 2007-08 financial year.

The draft legislation is Tax Laws Amendment (2011 Measures No. 9) Bill 2011 which was introduced on 23 November 2011.  

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